FY 2013 Financial Results Presentation Materials May 13, 2014 - - PowerPoint PPT Presentation

SLIDE 1

May 13, 2014 BOOKOFF Corporation Ltd.

(TSE First Section: 3313)

FY 2013 Financial Results Presentation Materials

SLIDE 2

• 1. Prior Period (FY 2013) Financial Report

Overview

・・・・ ・・・・ ・・・・ ・・・・

P2

• 2. Business Strategies

・・・・ ・・・・ ・・・・ ・・・・

P8

• 3. Current Fiscal Year (FY 2014) Plan

Overview

・・・・ ・・・・ ・・・・ ・・・・

P33

• 4. Featured Topics

・・・・ ・・・・ ・・・・ ・・・・

P37

• 5. Financial Information

・・・・ ・・・・ ・・・・ ・・・・

P41

• 6. Additional Information

・・・・ ・・・・ ・・・・ ・・・・

P45

1

Contents

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.

Note Concerning Forward-Looking Statements:

(Contact) BOOKOFF Corporation Ltd. Corporate Planning Department

SLIDE 3

Prior Period (FY 2013) Financial Report Overview

SLIDE 4

FY 2012

Ratio

FY 2013

Ratio YoY

Change

Net sales

76,670

• 79,159
• 103.2％

+2,488 BOOKOFF Reuse Packaged Media ・Other 52,484 12,548 11,638 68.5% 16.4% 15.2% 53,648 14,379 11,130 67.8% 18.2% 14.1% 102.2％ 114.6％ 95.6％ +1,164 +1,831

• 507

Operating income

1,914

2.5%

2,024

2.6% 105.7％ +109 BOOKOFF Reuse Packaged Media ・Other Corporate 3,395 465

• 127
• 1,819

3,450 917

• 469
• 1,874

101.6％ 196.9％

• +54

+451

• 341
• 55

Ordinary income

2,366

3.1%

2,608

3.3% 110.2％ +242 Extraordinary gain

－

• 64

0.1%

• +64

Extraordinary loss

483

0.6%

529

0.7% 109.4％ +45

Net income

1,058

1.4%

951

1.2% 89.9％

• 106

Financial Overview

• 1. Prior Period (FY 2013)

Financial Report Overview 3

Unit: million yen

SLIDE 5

Assessment of Earnings Forecast Assumptions (Oct 25)

4 10/25 Revised Plan Assumptions

(from Q2 Financial Results Presentation Materials)

Progress

Assess ment

Net sales [Existing Store Net Sales] BOOKOFF YoY 97％ Reuse YoY 105％ [New Stores] BO Stand-Alone X 3, BSB X 3 [Existing Store Net Sales] BOOKOFF YoY 97.3％ Reuse YoY 105.4% [New Stores] BO Stand-Alone X 3, BSB X 3 Gross profit ・Second Half 57.9% (in line with first-half) Second Half 58.0% (full-year 57.9%) SG&A

[Factors Leading to Decrease] ・Lower variable costs due to lower BOOKOFF existing store sales ・Lower initial investment/operating costs due to limited number of new store openings ・HQ cost control [Factors Leading to Increase] ・Higher payroll due to higher minimum wage ・Higher investment/costs due to BOOKOFF package development

In line with forecast Lower SG&A due to store operating cost control (payroll, etc.)

Non-operating income

Increase in gain on sale of used paper

• 1. Prior Period (FY 2013)

Financial Report Overview

SLIDE 6

5

• 1. Prior Period (FY 2013)

Financial Report Overview Forecast (Oct 25) Change

Actual

Change vs. Forecast

Net sales

40,252

+571

40,411

+731

+159

Gross profit

23,320

+479

23,449

+608

+129

SG&A

21,983

+340

21,437

• 205
• 546

Operating income

1,337

+138

2,011

+813

+674

Ordinary income

1,518

+54

2,326

+863

+808

Net Income

617

+43

1,068

+925

+451

Ratio of Total Sales

Gross Profit %

57.9%

+0.4%

58.0%

+0.5%

+0.1%

SG&A %

54.6%

+0.1%

53.0%

• 1.5%
• 1.6%

〈Second Half 〉

Unit: million yen

Earnings vs. Oct 25 Forecast (Second Half )

SLIDE 7

YoY Ordinary Income 2,608

FY 2012 FY 2013

2,366

• 377

6

• 1. Prior Period (FY 2013)

Financial Report Overview

+170 +451

Reuse

BOOKOFF +40 +40

• 42

Packaged Media Other Company Company

Existing stores +235 PY・ ・ ・ ・CY New Stores +142 Other +74 New Book Sales・ ・ ・ ・TSUTAYA +40 Unit: million yen Existing stores -326 PY・ ・ ・ ・CY New Stores +87 BO Online +124 Non-Operating Inc/Exp +187 Other +98 hug all, other

• 377

SLIDE 8

Net Income Change Factors

7

• 1. Prior Period (FY 2013)

Financial Report Overview

[Extraordinary Loss]

Impairments, loss on business withdrawals related to 22 store closings this period (including 20 BOOKOFF stores) Reserve for loss on business withdrawals recorded for seven planned closings next period (including six BOOKOFF stores)

[Income Taxes]

Mainly increase in effective tax burden due to initial net losses in new businesses launched by new subsidiary (hug all) .

Despite +¥240 million ordinary income (base), net income was -¥100 million. The reasons for this result lie in extraordinary losses and taxes:

SLIDE 9

• 2. Business Strategies

SLIDE 10

9

• 2. Business Strategies

Yahoo Business and Capital Alliance

SLIDE 11

Yahoo Business and Capital Alliance

10

• 2. Business Strategies
• No. 1 in Offline Reuse
• No. 1 in Online Reuse

Yahoo! Japan Auction

SLIDE 12

11

• 2. Business Strategies

Yahoo Business and Capital Alliance

Agreement Overview

Type of Share Issuance Planned Funding Shares to be Issued Dilutive Shares

Ratio of Voting Shares after Exercise

1.

Allocation of new shares to a third party

¥2.17 billion 3.10 million

15%

2.

Issuance of convertible bonds to a third party

¥7.7 billion 10.25 million

28%

• 1. + 2.

¥9.87 billion 13.35 million

43%

Share warrants may be exercised in stages at certain operating income levels for FYE March 2015 through FYE March 2018: When operating income exceeds ¥ ¥ ¥ ¥2.2 billion ・Exercise up to 45% (voting ratio of 30% when combined with 1.) When operating income exceeds ¥ ¥ ¥ ¥2.7 billion ・Exercise up to 100% (voting ratio of 43% when combined with 1.)

SLIDE 13

12

• 2. Business Strategies

Yahoo Business and Capital Alliance

Yahoo Auction serves as new sales

• utlet for BOOKOFF stores

・BOOKOFF inventory listed

• n Yahoo Auction

・Customize Yahoo Auction functions for more efficient sales ・Joint operating structure/system development for listing and delivery ・Launch at certain stores beginning FYE March 2015 ・Roll out to all directly operated stores over three years ・List 10 million used books on Yahoo Auction (5x present level)

SLIDE 14

13

• 2. Business Strategies

Yahoo Business and Capital Alliance

BOOKOFF Stores become a "sell-everything" format

・Tie in hug all business with BOOKOFF stores: General Purchasing Service Desk ・List purchased merchandise on Yahoo Auction ・Jointly develop systems for hug all buying, calculations, sales management ・Advertise to Yahoo customer base ・Run on trial basis during FYE March 2015 ・Will require longer roll-out than preceding plan, but will be executed with urgency

SLIDE 15

14

• 2. Business Strategies

Yahoo Business and Capital Alliance

Largest Reuse Center in Japan

(Planned Launch: March 2016) ・Collect certain BOOKOFF store products, list

• n Yahoo Auction

・General Purchasing Service Desk to collect, evaluate, buy, and list on Yahoo Auction ・Future: BtoB, fulfillment services in planning stages

SLIDE 16

Business Policies

15

The Evolution

• f BOOKOFF

Expand

Comprehensive Reuse Models

New Businesses

Mission

Infrastructure for people who don’t let things go to waste

s 2Q Briefing Materials Republished

• 2. Business Strategies

SLIDE 17

BOOKOFF Strengths

16

Network of 900 Stores

Name Recognition Trustworthy Brand Honest and Trustworthy Brand

BOOKOFF Strengths

• 2. Business Strategies

SLIDE 18

85% 90% 95% 100% 105% 110% 4月 5月 6月 7月 8月 9月 10月 11月 12月 1月 2月 3月

Immediate Issues

• 2. Business Strategies

17 BOOKOFF Existing Store YoY Sales

Small-/Medium- Format Stores

Large-Format Stores / Comprehensive Reuse Stores

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

SLIDE 19

BOOKOFF Response to Issues

18

• 2. Business Strategies

Reorganize Store Operations for Both Segments Improve Execution of Management Response

BOOKOFF Business Segment

BOOKOFF Stores

Reuse Business Segment

Reuse Stores Directly Operated Stores 1st Division

BOOKOFF Small-/Medium

• Format Stores

Directly Operated Stores 2nd Division

BOOKOFF Large-Format Stores / Comprehensive Reuse (BSB, BOP) Reuse Stand-Alone

Manage BOOKOFF store-in-store and Reuse store separately within Comprehensive Reuse Stores (BSB, BOP) to manage merchandise effectively by type Reorganize by package; create organizations that can respond to these immediate issues

SLIDE 20

The Future Direction of BOOKOFF

19

• 2. Business Strategies

BOOKOFF Stand-Alone stores

BSB

(BOOKOFF SUPER BAZAAR)

BOP

(BOOKOFF PLUS)

Tie in hug all business General Purchasing Service Desk

Respond to Contraction in Existing Merchandise Markets Comprehensive Reuse General Merchandise

Package Innovation Pricing Shelving

Improve Sales Efficiency (expand sales channels)

Improve Sales Efficiency

• No. 1 in Offline Reuse
• No. 1 in Online Reuse

Online Sales

(Yahoo Auction)

SLIDE 21

BOOKOFF Initiatives

20

• 2. Business Strategies

Package Innovation

• No. of

Stores

Add Household, Stationery

3

Reading Room (Fee-Based)

1

Concept Shop (80s Retro Goods Collection)

1

Sell New & Used Books

3 (1) Customer order service tied in with Online business (2) Expanded used mobile phone purchasing and sales 1

Recycling Station (Accepting Clothes, Shoes)

3

Pricing/Shelving

• No. of

Stores

Pricing Measures

84

SLIDE 22

21

• 2. Business Strategies

Add Household, Stationery (Nakameguro Station Store; two others)

BOOKOFF Packaging Innovations

SLIDE 23

22

• 2. Business Strategies

Reading Room (Yokohama Azamino Store) 80s Retro Goods Collection (Hiratsuka Shinomiya Store) New & Used Book Sales (BOOKOFF Fujisawa Yoda Store; two others)

BOOKOFF Packaging Innovations

SLIDE 24

23

• 2. Business Strategies

Recycling Station (Sagamihara Station Store; two others) (1) Customer order service tied in with Online business (2) Expanded purchasing and sales of used mobile phones (Shinjuku Station West Store)

BOOKOFF Packaging Innovations

SLIDE 25

Business Policies

24

The Evolution

• f BOOKOFF

Expand

Comprehensive Reuse Models

New Businesses

Mission

Infrastructure for people who don’t let things go to waste

• 2. Business Strategies

s 2Q Briefing Materials Republished

SLIDE 26

Expand Comprehensive Reuse Models

25

• 2. Business Strategies

917

465 200

• 116

2011.3期 期 期 期

14,379

2013.3期 期 期 期 2014.3期 期 期 期

12,548 11,117 Reuse Net Sales 9,761 102％ ％ ％ ％ 102％ ％ ％ ％ 103％ ％ ％ ％ 105％ ％ ％ ％

2012.3期 期 期 期 2011.3期 期 期 期 2013.3期 期 期 期 2014.3期 期 期 期 2012.3期 期 期 期

Existing Stores YoY (Full-Year)

Reuse Operating Income

FY2010 FY2011 FY2012 FY2013 FY2010 FY2011 FY2012 FY2013 Unit: million yen

SLIDE 27

New Stores, Remodels

26

• 2. Business Strategies

BOOKOFF SUPER BAZAAR (BSB) BOOKOFF PLUS (BO PLUS)

FYE March 2015 Plan

[New Stores] ・BSB 2 ・BO PLUS 2 [Remodels] ・Remodel existing BOOKOFF into BO Plus: 2 to 4

Moriguchi Jaguartown (Moriguchi City, Osaka Prefecture) Route 407 Otaiizuka (Ota City, Gunma Prefecture) Route 1 Yokkaichihinaga (Yokkaichi City, Mie Prefecture) Namba Ebisubashi (Chuo-ku, Osaka City) Route 11 Kanonji (Kanonji City, Kagawa Prefecture)

SLIDE 28

Composition by Package (FY 2013) Profits on Per-Store Basis

27

• 2. Business Strategies
• No. of Stores

Net sales Store Floor Space Store Package Definition

Exterior Loca- tions Stores*

Net sales

(million yen)

Ratio Floor Space

(Square Meter)

Ratio

BOOKOFF SUPER BAZAAR (BSB)

Comprehensive large-format BOOKOFF stores selling clothing, fashion goods, sporting goods, and other pre-owned goods

32

(+3)

64

(+6)

18,816

(+14.5%)

31.7%

(+2.7%)

99

(+13)

39.1%

(+4.0%)

BOOKOFF

BOOKOFF Stand-Alone stores BOOKOFF stores selling books, software, mobile phones, trading cards, hobby goods, and new books

261

(-19)

261

(-19)

34,661

(-0.9%)

58.3%

(-3.3%)

126

(-7)

49.1%

(-4.6%)

BOOKOFF PLUS

Comprehensive medium- format BOOKOFF selling clothing, fashion goods, sporting goods, and other pre-owned products

24

(+2)

48

(+4)

4,657

(+11.9%)

7.8%

(+0.5%)

26

(+3)

9.8%

(+0.6%)

Other

Not included above: Reuse stand-alone stores

11

(±0)

11

(±0)

1,287

(+8.8%)

2.2%

(+0.1%)

7

(-0)

2.0%

(-0.0%)

Total

328

(-14)

384

(-9)

59,421

(+4.7%)

100% 258

(+10)

100%

・Store numbers and store floor space as of March 2014 ・( ) = YoY change ・Excluding new TSUTAYA, HARDOFF, Overseas stores

*Stores are defined as a discrete business model; a single location may host more than one store.

SLIDE 29

Business Policies

28

The Evolution

• f BOOKOFF

Expand

Comprehensive Reuse Models

New Businesses

Mission

Infrastructure for people who don’t let things go to waste

• 2. Business Strategies

s 2Q Briefing Materials Republished

SLIDE 30

• 2. Business Strategies

Launch new businesses to fulfill our mission ("BOOKOFF for people who don’t let things go to waste") and to achieve medium-term growth via new business domains.

29

HUG ALL

Purchase Sell

Optimize Channel Maximize Product Value

Delivery Location Visit Agent BtoB

Central Functions

Buy through all channels : ALL BUY Sell at highest price WEB Directly Operated Stores BtoB Overseas

SLIDE 31

• 2. Business Strategies

30 In-Home Purchasing (Concierge) BtoB Purchases Online Auctions/Online Shopping

Purchase Sell

BtoB Sales

HUG ALL

FYE March 2014: 18,000 customers (1,000 purchases; 17,000 sales); ¥120 million in net sales. New General Purchase Service Desks (P13, P19) in BOOKOFF stores, in addition to current in- home purchasing (CtoB) and BtoB purchasing. New service serves as location for merchandise inspection/valuation and sales (trials initiated during FYE March 2015).

SLIDE 32

Customer (Sell) Customer (Purchase)

HUG ALL

• 2. Business Strategies

31

General Purchasing Services Desk

All channels (not just individuals) All channels (not just individuals) Become a part of the customer’s everyday lifestyle Everything is fair game (even products not sold in BSB)

Mainly Targets Individuals Mainly Targets Individuals

SLIDE 33

Operating Income Outlook

32

• 2. Business Strategies

2012.3 2013.3 2014.3 2015.3 2016.3 2017.3 2018.3 2019.3

(new record)

¥3.9 billion ¥3.7 billion ¥2.8 billion ¥1.5 billion ¥1.5 billion ¥2.0 billion ¥1.9 billion ¥3.4 billion

FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018

SLIDE 34

Current Fiscal Year (FY 2014) Plan Overview

SLIDE 35

Current Fiscal Year (FY 2014) Plan Overview

FYE March 2014 Ratio FYE March 2015 (Plan) Ratio Change

Net sales

79,159

• 80,000
• +840

Operating income

2,024

2.6%

1,500

1.9%

• 524

Ordinary income

2,608

3.3%

2,000

2.5%

• 608

Net income

951

1.2%

600

0.8%

• 351

EPS

52.09 yen 29.54yen

Dividend

25 yen 25yen

Capital Investment

2,442 2,350

Depreciation & amortization

2,373 2,100

3． ． ． ． Current Fiscal Year (FY 2014) Plan Overview 34

(plan) Unit: million yen

SLIDE 36

Profit Plan Variance Factors

2,608

FY 2014 Forecast

2,000

• 300

35

+100 +100

BOOKOFF, Reuse Directly Operated

• 50
• 50
• 210 of profit variance above due to

projected FYE March 2015 costs. ・ ・ ・ ・BO Online Investment

• 100

・ ・ ・ ・Member services

• 50

・ ・ ・ ・HQ, etc.

• 60
• 150
• 150
• 60
• 60
• 150
• 150

Online Business Build-out/systems investment for business expansion

Royalty Income HQ, etc. 3． ． ． ． Current Fiscal Year (FY 2014) Plan Overview

Unit: million yen

FY 2013result

Introduction of Member Services Higher costs charged by shippers for dispatch purchasing pickups

SLIDE 37

Plan Assumptions

36

BOOKOFF Directly Operated Stores

・Existing store net sales YoY 100% ・Gross margin ratio Level with PY

Online ・Higher costs charged by shippers for dispatch purchasing pickups ・Warehouse expansions, systems investment for future business expansion

Reuse ・Existing store net sales YoY 102% ・Gross margin ratio Level with PY Other

・Decrease in royalties due to FC store closings (BOOKOFF Business) ・Advisory fees related to Yahoo partnership (Corporate)

Openings Remodels BOOKOFF SUPER BAZAAR 2 locations BOOKOFF PLUS 2 locations

BOOKOFF Stand-AloneBOOKOFF PLUS Remodel (2 to 4 locations) New Businesses (hug all) Continue investments for second-year business, business remodels

Other

Introducing new member card service to encourage more store visits Planned initial costs related to new card service launch 3． ． ． ． Current Fiscal Year (FY 2014) Plan Overview

Existing Investments

SLIDE 38

• 4. Featured Topics

SLIDE 39

BOOKOFF Online

38

Increase in SG&A due to shipping company price increases for dispatch purchase pickups, resulting in lower profits year on year. However, investment in warehouse expansion and systems development for future business growth should result in doubled revenues five years from now.

9,256 6,612 10,909 15,207 17,190

Tomei Logistics Center No.2 Center

Sales (left axis) Pre-Owned Goods Inventory (right axis)

Warehouse Floor Space and Sales, Warehoused Items

• 4. Featured Topics

百万円 Million Units

square meter square meter square meter square meter square meter

¥100 million

FY2008

Warehouse size

FY2009 FY2010 FY2011 FY2012 FY2013

SLIDE 40

Member Services

39

We introduced a new member card service to encourage more store visits; launched at certain locations for testing.

• 4. Featured Topics

SLIDE 41

PB (Private Brand) Products

• 4. Featured Topics

40

Sticker Books

BOOKOFF Original Publication Date: August Titles: Six Price: 105 yen Cumulative Shipments: 220,000

Be Picture Books (Second Series)

Winners of the Be Picture Book Prize Publication Date: October Titles: Five Price: 500 yen Cumulative Shipments: 20,000

Children’s Practice Drill Books

Supervised by Chikara Oyano Release Date: March Titles: Eight Price: 200 yen Cumulative Shipments: 70,000 Items released during FYE March 2014

SLIDE 42

• 5. Financial Information

SLIDE 43

Consolidated Statements of Income

42

• 5. Financial Information

Ｖ FY2012 Ratio FY2013 Ratio YoY

• Vs. plan

Net sales

76,670

• 79,159
• 103.2％

+2,488

Gross profit

44,714

58.3%

45,869

57.9% 102.6%

+1,155

SG&A

42,799

55.8%

43,845

55.4% 102.4%

+1,045

Operating income

1,914

2.5%

2,024

2.6% 105.7％

+109

Non-operating income

710

0.9%

861

1.1% 121.3%

+150

Non-operating expenses

258

0.3%

277

0.4% 107.1%

+18

Ordinary income

2,366

3.1%

2,608

3.3% 110.2％

+242

Extraordinary gain

－

• 64

0.1%

• +64

Extraordinary loss

483

0.6％

529

0.7% 109.4%

+45

Income before income taxes

1,882

2.5%

2,143

2.7％ 113.9%

+261

Net income

1,058

1.4%

951

1.2% 89.9％

• 106

Unit: million yen

SLIDE 44

Consolidated Balance Sheet

43

• 5. Financial Information

FY 2012 Ratio FY 2013 Ratio Change Cash/deposits

4,630

11.7%

5,597

13.9%

+967

Merchandise

10,821

27.4%

11,251

27.9%

+430

Current assets

19,351

49.0%

20,844

51.7%

+1,492

Noncurrent assets

20,103

51.0%

19,492

48.3%

• 611

Total assets

39,455

100.0%

40,336

100.0%

+881

Current liabilities

14,037

35.6%

13,399

33.2%

• 638

Noncurrent liabilities

10,167

25.8%

11,711

29.0%

+1,543

Total liabilities

24,205

61.3%

25,110

62.3%

+904

Net assets

15,249

38.7%

15,226

37.7%

• 23

Interest-bearing debt

14,851

37.6%

15,776

39.1%

+925

Unit: million yen

Interest-bearing debt = Short-term loans payable + current portion of long-term loans payable + long-term loans payable + long-term accounts payable – other (installment) + corporate bonds

SLIDE 45

Consolidated Statements of Cash Flow

44

• 5. Financial Information

FY 2012 FY 2013 Change Income before income taxes

1,882 2,143 +261

Depreciation & amortization/ Amortization of goodwill

2,391 2,373

• 18

Impairment loss, disposals, closings, stock revaluation loss, provision for bad debt

420 574 +153

Change in current assets/liabilities

• 1,552
• 797

+755

Tax payments, refunds

• 1,278
• 1,024

+254

Operating Activities

1,863 3,269 +1,405

Change in noncurrent assets & guarantee deposits

• 2,103
• 1,330

+772

Other

• 87

10 +98

Investing Activities

• 2,190
• 1,319

+871

Operating activities + investing activities

• 327

1,949 +2,277

Financing activities

• 905
• 1,000
• 94

Cash & cash equivalents, beginning of period

5,851 4,630

• 1,220

Cash & cash equivalents, end of period

4,630 5,597 +967

Unit: million yen

SLIDE 46

• 6. Additional Information

SLIDE 47

Company Profile

• 6. Additional Information

46 Company BOOKOFF Corporation Ltd. Representative President and CEO Nobuyuki Matsushita Established August, 1991 Head Office

2-14-20 Kobuchi, Minami-ku, Sagamihara-shi, Kanagawa-Prefecture, Japan

Capital ¥2.564 billion Business activities

Operation of “BOOKOFF” (pre-owned book stores) and other secondhand goods stores

Number of group 13 subsidiaries, 1 affiliated company Number of stores 990 stores (including 540 FC stores) Employees 1,075 Listed Market Tokyo Stock Exchange First Market

(Stock code：3313)

Unit of Trading 100 shares

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

a company that creates the infrastructure for people who don’t let things go to waste.

Contributing to society through

• ur business activities

The pursuit of employees’ material and spiritual wellbeing Company Profile Philosophy Mission

As of March,2014

Key Performance Indicators /Dividend Policy

Key Performance Indicators Stable and sustainable growth in sales and profit Ordinary income of ¥10 billion

Dividend Policy

Target 25% payout ratio based on consolidated net income

SLIDE 48

・ ・ ・ ・Founding ・ ・ ・ ・"Sell us your books" ・ ・ ・ ・FC Expansion ・ ・ ・ ・Faster BOOKOFF Openings ・ ・ ・ ・New Reuse Business B KIDS, B SPORTS ・ ・ ・ ・Comprehensive large-format stores: pre-owned goods ・ ・ ・ ・Overseas Expansion ・ ・ ・ ・Online Business Starts ・ ・ ・ ・Introduction/remodeling of comprehensive large- format BOOKOFF SUPER BAZAAR stores and medium-format BOOKOFF PLUS stores ・ ・ ・ ・Large-scale urban BOOKOFF Openings ・ ・ ・ ・New Products (hobby goods, trading cards, mobile phones, private label goods)

Store Packaging Evolution

As of March,2014

• 6. Additional Information

47

First BOOKOFF Store BOOKOFF Used Stores

(comprehensive, large-format)

Focus on suburban locations

BOOKOFF: Large-scale urban stores

977 stores in Japan, 13 stores overseas BOOKOFF (Domestic) 850 stores BOOKOFF (Overseas) 13 stores Reuse Business Stores 87 TSUTAYA, New Issues, Other 40 stores

(including 540 FC stores)

977 stores in Japan, 13 stores overseas BOOKOFF (Domestic) 850 stores BOOKOFF (Overseas) 13 stores Reuse Business Stores 87 TSUTAYA, New Issues, Other 40 stores

(including 540 FC stores)

Overseas Store

SLIDE 49

• 6. Additional Information

48

BOOKOFF SUPER BAZAAR is a comprehensive large-format store model that leverages the well-known BOOKOFF brand. These stores offer a wide variety of product on a sales floor of between 1,653 and 5,620 square meter, providing customers a space to Sell Anything and Bring Everything. We believe the BOOKOFF SUPER BAZAAR is an entity that will help customers change their lifestyles for the Smarter.

Layout for Route 409 Kawasaki Minato-cho BSB store (4,466 square meter)

SLIDE 50

Four Tactics to Offer an Unmatched Breadth of Options

• 6. Additional Information

49

・Most products discounted by 50% or more ・Affordable pricing starting at ¥200

① ① ① ① Low prices

Unlike department stores, brands are not grouped separately. Multiple brands displayed together.

③ ③ ③ ③ Sales floor

Staff don’t push customers to buy.

④ ④ ④ ④ Casual atmosphere

Unmatched volume of products & variety of brands.

② ② ② ② Product volumes

“The fact that prices are lower than Uniqlo or g.u. is appealing.” (Man, 36) “New, it costs ¥10,000, so I could purchase only one. But here I can buy three.” (Man, 43) “At a regular shop, the target age range and styles are limited. But the range of ages and brands represented here make choosing fun.” (Woman, 43) Department stores are sectioned by brand, but I like how you can see a variety of brands at once here. (Woman, 24) The staff don’t pester me, so I can feel relaxed while choosing clothes.” (Man, 38)

Unmatched breadth of options Unmatched breadth of options (= merit of size increase)

Comments from customers (100 buyers, 101 sellers) visiting BSB stores in April 2011 at Machida Chuo-dori, Route 409 Kawasaki Minato-cho, Omiya Stellar Town.

SLIDE 51

Frequented by customers who are seeking low prices and those with a unique sensibility who want to enjoy fashion freely.

• 6. Additional Information

50

There are quite a few hard-to-find soccer

• uniforms. It’s quite well-known among my

soccer buddies. Items that are regularly priced ¥18,000 cost ¥2,000 here. I can’t help buying them. (Man, 36) Consumers who dig up rare items that fit their interests I can try out new genres of clothing. I want to be adventurous. I can choose young women’s brands like Cecil McBee or Tommy Hilfiger without

• hesitation. (Woman, 40)

Housewives looking to try new brands and genres If I think it suits me, I go ahead and buy

• it. Department stores carry only what’s

in season, but here I buy clothing that I’ve liked in the past, but in a different

• color. (Woman, 24)

Young consumers who want to enjoy coordinating their own wardrobes Maternity is temporary, so secondhand is fine. You wear it for just one season, so clothes in decent condition are good

• enough. (Woman, 31)

Housewives who casually buy secondhand goods as disposable items I come to buy the brand I like (Vivienne Westwood) . It’s a brand I know, so even if it’s secondhand I can feel comfortable buying it. Here they have designs that aren’t currently sold in department stores. (Woman, 28) I think people have different tastes, and I want to find things that suit me. With secondhand goods, I feel happy thinking I’ve found the very last item. (Woman, 42) Middle-aged consumers who wish to mix-and-match one-of-a-kind clothes Office workers looking to wear

• nly their favorite brands

SLIDE 52

10 20 30 40 50 60

BSB stores have increased the number of customers selling for the first time, helping them experience the Reuse cycle.

First experience selling items was at BSB (20％ ％ ％ ％)

Customer survey conducted in May 2011 at the Route 409 Kawasaki Minatomachi BSB store Q1: N= 50 people Q2: N=101 people (multiple answers allowed)

Throw away (57%)

• 6. Additional Information

51

• Q1. Have you ever used a store’s

purchasing service?

• Q2. What would you do with

belongings if BSB weren’t here?

SLIDE 53

Source (1997, 2002, 2007) :Ministry of Economy, Trade and Industry, Industry Statistics, pre-owned Retail Sales (excluding cars, bicycles, books, antiques) (2010) :Japan Reuse Affairs Association, Reuse Goods Annual Sales (2011) ：Estimate based on Japan Reuse Affairs Association, Reuse Goods Annual Sales (2012) Ministry of the Environment "Availability of Reuse Goods/Market Survey (Draft); Estimate of Retails Purchases vs. Entire Reuse Goods Market (Excluding Cars, Bicycles, Books)"

which should be major market drivers. Estimated reuse good market size: ¥469.9 billion, five times 1997 levels. Much room for growth in clothing and fashion goods categories, which should be major market drivers.

Reuse Market

• 6. Additional Information

52

Market Size for pre-owned Retail Goods (excluding bicycles, books)

¥100 million

SLIDE 54

BOOKOFF Chain

Shanti Volunteer Association Volunteers Donated Funds Launch Mobile Libraries Mobile Library Operations

Area Affected by the Disaster

(Fukushima Prefecture , Miyagi Prefecture)

BOOKOFF Chain

Confirm need for books and local new-book stores

Purchase books and request returns from each elementary school

Area Affected by the Disaster

elementary schools

New Book Stores Deliver books

BOOKS TO THE PEOPLE

1.Popular books donated to elementary schools (new book purchases made at local stores)

• 2. Support (funding, participation) for Mobile

Libraries provided by Shanti Volunteer Association

BOOKS TO THE PEOPLE: BOOKOFF Group contribution to society through books Two initiatives to help make things better for people in the northeastern Japan disaster area

• 6. Additional Information

53

FY2012

2,124books

FY2013

2,316books

138 Chain (Group, FC) Employee Volunteers