FY 2012 Financial Results Presentation Materials May 14, 2013 - - PowerPoint PPT Presentation

SLIDE 1

May 14, 2013 BOOKOFF Corporation Ltd.

（TSE First Section: 3313）

FY 2012 Financial Results Presentation Materials

SLIDE 2

Contents

• 1. Prior Period (FY 2012) Financial Report

Overview

・・・・

P3～11

• 2. Current Fiscal Year (FY 2013) Plan

Overview

・・・・

P12～16

• 3. Business Strategy

・・・・

P17～40

• 4. Prior Period (FY 2012) Financial Data

・・・・

P41～47

• 5. Additional Information

・・・・

P48～55

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

1

SLIDE 3

Despite prior-year (FY 2012) profit gains in Reuse Business and Online, lower customer traffic at existing BOOKOFF stores led to lower profits for the fiscal year Net Sales ¥76.67 billion (1.3% year-on-year gain), Operating Income ¥2.366 billion (37.8% decrease), Net Income ¥1.058 billion (43.3% decrease)

Overview

Current-period (FY 2013) forecast: Operating income ¥2.3 billion, nearly in line with prior-period results Higher profit in Existing Stores, New-Store growth, and Online; advance investment in New Businesses expected to grow over the medium and long term. Strategies to rebuild customer traffic at BOOKOFF stores, the Group's main revenue driver Result of integrated chain-wide campaigns during year-end holidays: Correction in Seller numbers; future scheduled campaigns (two this period) should lead to recovery in Buyers Continued roll-out of BOOKOFF SUPER BAZAAR (BSB), comprehensive large- format stores leading Group growth; five new BSB planned for FY 2013 comprehensive medium-format BOOKOFF PLUS repackaging in progress; strategies combining large-format and medium-format planned to drive share growth in the reuse market

2

SLIDE 4

• 1. Prior Period (FY2012) Financial Report Overview

SLIDE 5

Ｖ FY 2011

Ratio

FY 2012

Ratio YoY

Change

Net sales

75,716

－

76,670

－ 101.3%

+953 BOOKOFF Reuse

Packaged Media ・Other

52,027 11,117 12,572 52,484 12,548 11,638

100.9%

112.9%

92.6%

+456 +1,430

• 933

Operating income

3,432

4.5%

1,914

2.5% 55.8%

• 1,518

BOOKOFF Reuse

Packaged Media ・Other

Corporate 5,197 200

• 31
• 1,934

3,395 465

• 127
• 1,819
• 1,802

+265

• 96

+115

Ordinary income

3,803

5.0%

2,366

3.1% 62.2%

• 1,436

Net income

1,867

2.5%

1,058

1.4% 56.7%

• 809

Prior Period (FY2012) Financial Report Overview Net sales roughly ¥900 million higher;

• rdinary income about ¥1.4 billion lower year-on-year.

Ordinary income underperformed initial plan by ¥1.1 billion (as announced in revised earnings statement published February 8).

Unit: million yen

• 1. Prior Period (FY2012)

Financial Report Overview

• Vs. Initial

Plan

• Vs. 2/8

Forecast

• 3,329

+670

• 1,285
• 85
• 1,133

+16

• 641

+58

4

SLIDE 6

Initial Plan Assumptions, Actual, Assessments

• 1. Prior Period (FY2012)

Financial Report Overview Plan Assumptions Progress

Assess ment

BOOKOFF ・Existing store net sales YoY： 98.0% ・Gross margin ratio： +1.0%

Sales promo revisions: Limited use of sales, coupons

・Existing store net sales YoY： 95.0% ・Gross margin ratio： +0.1%

Limited use of coupons expected to add +1.0% to Gross Profit Ratio; however, 2H stronger purchase policies resulted in increased purchase unit costs, Gross Profit level with PY.

Reuse ・YoY net sales： 102.0% ・Gross margin ratio： +1.0%

Limit use of coupons

・YoY net sales： 103.0% ・Gross margin ratio： +3.4% Other Higher utilities costs (higher usage in year following March 11 disaster; rate hikes) In line with plan New Stores ・7 BSB（+2 YoY） ・2 BO urban large-format stores ・7 BSB ・3 BO urban large-format stores But, delays in sales run up Other ・Limited use of sales, coupons → Stronger sales promos ・Rolled out mobile phone business to all stores, stronger sales promos ・POS changeover in FC (three-year rollout complete) In line with plan Change in TV commercial strategy (Branding → Sales Promotion)

Existing

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SLIDE 7

Growth in PY New Stores, CY New Stores and expanded Online offerings contribute to higher revenues. But, slight overall gain due to BOOKOFF existing store revenue declines.

YoY net sales

• 1. Prior Period (FY2012)

Financial Report Overview

76,670

FY 2011 FY 2012

75,716

Online +747 Other

• 86

TSUTAYA New Issues, Other

BOOKOFF +456 Reuse +1,430

Packaged Media,

• ther
• 933

+953

Reuse Store Closing

• 238

Reuse PY New Stores ＋430 Resue CY New Stores＋1,238

Unit: million yen

BOOKOFF existing stores

• 2,894

BOOKOFF PY New Stores ＋828 BOOKOFF CY New Stores＋1,862

6

SLIDE 8

Ordinary income ¥1.4 billion lower vs. prior year; ¥1.1 billion lower vs. initial plan (next page). PY new store growth, existing Reuse stores, and Online report higher profits; however, BOOKOFF existing stores, sales run-up in new stores, TSUTAYA profit declines have large impact.

YoY Ordinary Income

• 1. Prior Period (FY2012)

Financial Report Overview

2,366

FY 2011 FY 2012

3,803

TSUTAYA

• 202

New Issues +87 Negative Goodwill -64 Other +37

• 1,436

Reuse +307 BOOKOFF

• 1,723

Online＋180 Other

• 43

Unit: million yen

Stronger sales promo (TV) Investment (sales promo) in new products (mobile phones) electricity costs, POS rollout -600 BOOKOFF PY New Stores ＋150 BOOKOFF CY New Stores -367 Existing Reuse stores +378 Reuse PY New Stores +227 Reuse CY New Stores -298 Foreign Exchange Gain+77 Other +45 In line with plan

BOOKOFF existing stores Lower Revenues

• 1,043

7

Packaged Media, other

• 142

Company +122

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Ordinary Profit vs. Plan

• 1. Prior Period (FY2012)

Financial Report Overview

2,366

FY 2012 Initial Plan FY 2012 Result

Unit: million yen

3,500

• 1,133

BOOKOFF existing stores Lower Revenues

• 1,000

Sales runup of New Stores

• 400

TSUTAYA Lower Revenues

• 170

Existing Reuse stores +300

Online +100

Foreign Exchange Gain, other +37

8

SLIDE 10

PY (FY 2012) Review

Coupon Redemption Rate (vs. Total Net Sales/Right Axis) Existing Store Buyers vs. PY

Year Avg. 2.7% Annual total 12,000 times Annual total 12,000 times Per-store 3.2x/month

*Excluding corporate-wide campaigns

Sales Promos per Store (left axis)*

Sales, Coupons Issued in FY 2011 and Existing Store Buyers vs. PY

• 1. Prior Period (FY2012)

Financial Report Overview 9 3Q Briefing Materials Republished

Time s

Apr May Jun Aug Oct Nov Dec Jan Feb Mar Jul Sep FY2011

FY 2011 existing store net sales almost level with PY; however, store stand- alone sales discounts and overuse of coupons led management to identify issues in poor store operations.

SLIDE 11

PY (FY 2012) Review

Existing Store Buyers vs. PY 92.6% Existing Store Buyers vs. PY 95.0% Year-End Holiday Corporate-Wide Campaign Fundamental rethinking of sales discounts and coupons. Limit use of sales discounts and coupons; shift approach to call-to-action TV commercials. (shift away from discounts toward promotions)

Initial Plan Assumptions 1H Progress 2H Recovery Measures

Review selling prices, sales promotions for medium- and long-term progress

While policy measures resulted in fewer customers during 1Q within projected scope, Fewer Buyers stemming from an unexpected decrease in Sellers; Fewer purchases → reduced sales capacity leading to greater decrease in Buyers than projected.

Unexpected decrease in Sellers led to greater decrease in Buyers than projected

Management determined that promotions to drive non-discounted sales was insufficient. Year-end holiday corporate-wide buying/selling campaign; linked to TV commercials maximizing effect and recovery for customer traffic. More effective promotions, roll-out campaign to generate activity FY 2012 Initial Management Policies and Progress

• 1. Prior Period (FY2012)

Financial Report Overview 10 3Q Briefing Materials Republished

SLIDE 12

PY (FY 2012) Review

Campaigns timed with peak activity and linked to TV commercials led to improved results. Sellers increased after end of campaign; however, Buyer recovery was not sufficient. The Company will continue activity-generating campaigns on regular basis to bring back Buyer numbers.

Sellers FY 2012 BOOKOFF Existing Stores Customer Traffic vs. PY Buyers

Dec 22-31 Sellers vs. PY 108.5% Jan 1-3 Buyers vs. PY 110.6%

• 1. Prior Period (FY2012)

Financial Report Overview 11 3Q Briefing Materials Republished

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

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• 2. Current Fiscal Year (FY 2013) Plan Overview

SLIDE 14

Current Fiscal Year (FY 2013) Plan Overview

FY 2012 result Ratio FY 2013 plan Ratio YoY Change Net sales

76,670

－

80,000

－ 104.3％

＋3,329

Operating income

1,914

2.5％

1,900

2.4％ 99.2％

• 14

Ordinary income

2,366

3.1％

2,300

2.9％ 97.2％

• 66

Net income

1,058

1.4％

1,000

1.3％ 94.5％

• 58

EPS

57.30yen 53.81yen

• 3.49yen

Dividend

25yen 25yen －

Unit: million yen

• 2. Current Fiscal Year (FY 2013)

Plan Overview Capital Investment

3,497 3,300

• 197

Depreciation & amortization

2,391 2,400

Level with PY

Projecting increased revenues with new store sales and growing Online business; however, profits nearly level with prior year due to advance investment in new businesses.

13

（plan）

SLIDE 15

Plan Assumptions

• 2. Current Fiscal Year (FY 2013)

Plan Overview

BOOKOFF

Directly Operated Stores

・Existing store net sales YoY 101% ・Gross margin ratio Level with PY ・Increase corporate-wide campaigns (linked to TV commercials); twice per year (Golden Week, Year-End Holidays)

Online

・Higher shipping costs (cost increases) -140 million; absorb through higher revenues while ensuring higher profits.

Reuse

・Existing store net sales YoY 103% ・Gross margin ratio

• 0.8%

Introduce policies focused on turnover to link improved sales capacity (due to stronger purchasing) to net sales.

Packaged Media

・One-cycle impact of 100-yen rentals for older movies; improve profitability by continuing to lower costs

Other

・Forecasting 200 million in additional PA payroll unit costs

Openings Remodels

・BOOKOFF SUPER BAZAAR 5 BSB (-2 YoY) BOOKOFF Stand-Alone Stores 4 (including 2 overseas) ・Shift from BOOKOFF to BOOKOFF PLUS (add fashion goods) 2-3 stores

New Businesses

・Looking to business expansion over medium-/long-term, Launch new Reuse businesses not limited to store model (P37-39) ・Projecting continuing advance investment for test operations of new business models over the next two to three years. Create a business model based on the preceding that can generate ¥1 billion in annual ordinary income as a business in 10 years.

Other

・Completed POS rollout in all stores; continue investment for more efficient Reuse Business operations

14

Existing Investments

SLIDE 16

Factors Driving Change in Ordinary Income per Plan

• 2. Current Fiscal Year (FY 2013)

Plan Overview

Projecting increased profits at existing Stores, PY new store sales, online sales; However, advance investment in new businesses will lead to earnings level with prior year. FY 2012result

2,366

Unit: million yen

2,300

• 66

Existing stores ＋200 PY New Stores ＋710

CY New Stores Remodels -400 PA Payroll Unit Cost -190 Purchasing Initiatives -180 PY Forex Gain -50 Online ＋110

FY 2013pｌan

New Businesses

• 230

15

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• 2. Current Fiscal Year (FY 2013)

Plan Overview

FY 2012result

2,366

Unit: million yen

2,300

• 66

FY 2013pｌan

Reuse ＋155 BOOKOFF ＋265 PM ＋33 Corporate

• 283

Other

• 236

Change in Account * ＋120 Change in Account * ＋30 Change in Account *

• 150

PY Forex Gain -50 Taxes

• 80

New Business recorded under Other in by segment classification.

（Reuse ） PY New Stores ＋350 CY New Stores, Remod -200 PA Payroll Inc.

• 40

（BOOKOFF ） Existing stores ＋200 PY New Stores ＋360 CY New Stores

• 200

PA Payroll Incr. -150 Purchase Init.

• 180

Online ＋110

New Businesses

• 230

16

*Change in account classification associated with staff organization as of April 1, 2013

Factors Driving Change in Ordinary Income per Plan (by Segment)

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• 3. Business Strategy

SLIDE 19

• 3. Business Strategy

Our Ideal and Customer Value

18

Customers

Contributing to society through our business activities The pursuit of employees’ material and spiritual wellbeing Philosophy

(How to realize Management Philosophy? = Contribute to the World via Reuse Business)

【 Purchase 】

• Buy more
• Buy anything
• Buy quickly (no waiting)
• Sell with confidence

(price, brand...)

• Sell without the hassle

(Outbound, delivery and other services) 【 Sell 】

• Wide variety
• Low, straight-forward pricing

(Buy more (Have fun shopping))

• Find bargains
• Show customers something new
• Popular (best-selling) items
• Buy anytime, anywhere

(900 stores, BO Online)

「LOVE USED」

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

Mission Value Perceived by the Customer ・ Value your possessions ・Be smart with your money ・Keep a clean house (an enjoyable space) ・Have a good time ・Have fun shopping ・Try something new ・Find something new

SLIDE 20

Business Expansion Overview

• 3. Business Strategy

19

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

Packaged Media

Offer Expertise to BO

Reuse Business

Leverage BOOKOFF customer attraction power to expand store network and uncover latent markets

Online Business

Leverage BOOKOFF name recognition to offer services meeting diverse customer needs

Overseas Business

Leverage mature business models in Japan to expand Reuse Business overseas

New Business

Leverage BOOKOFF brand image (Sell with confidence) to expand Reuse Business lines beyond the store model framework

Core Businesses 「BOOKOFF」

Network of 900 Stores throughout Japan 100 million customer transactions per year High name recognition via store network Sell with confidence (brand recognition)

SLIDE 21

• 3. Business Strategy

The Evolution

• f BOOKOFF

Expand

Comprehensive Reuse Models

New Businesses

don’t let things go to waste

Mission

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

20

Stores Online

SLIDE 22

• 3. Business Strategy

The Evolution

• f BOOKOFF

Expand

Comprehensive Reuse Models

Expand

Comprehensive Reuse Models

New Businesses New Businesses

don’t let things go to waste

Mission

Infrastructure for people who don’t let things go to waste The Evolution of BOOKOFF

21

Stores Online

SLIDE 23

• 3. Business Strategy

Usage per Public Library

Japan Library Association Data

While new publications began to decline in 1995, public library usage has grown over the past four years. People continue to read books; books are still a powerful medium.

The Evolution of BOOKOFF

Items Lent (left axis) Visitors (right axis)

22

Number of Public Libraries

• Vs. 2007

+5%

• Vs. 2007

+16%

• Vs. 2007

+108

Reservations (left axis)

• Vs. 2007

+44%

1,000 People 1,000 Units

Locations

2007 2008 2010 2011 2009 2007 2008 2010 2011 2009

1,000

Reservations

SLIDE 24

• 3. Business Strategy

Maximize BOOKOFF chain-wide revenues and profits, making changes according to local/individual business conditions

The Evolution of BOOKOFF

23

Respond to changes in the business environment, moving beyond simply adding products and services; review pricing and operations for existing products to change the fundamental idea of the store package itself, maintaining and building from 100 million transactions per year. To serve customers not presently reached, BOOKOFF will improve services based on current products and increase inventory by maximizing purchasing as a means to growing revenues and profits.

Stores Online

SLIDE 25

Expand Product Offerings

Fundamental revision of sales promo strategies (Individual store promos → corporate-wide promos)

The Evolution of BOOKOFF(Stores)

• 3. Business Strategy

Limit indiscriminate use of discounts, coupons at individual stores Limit indiscriminate use of discounts, coupons at individual stores

FY 2012 FY 2013

(year end holidays) Corporate-wide campaigns (year-end holidays) Corporate-wide campaigns (Golden Week)

Trial

Trading Cards Mobile phones

Private Label (picture books) Private Label Stage 1 (picture books) Private Label Private Label Stage 2 (drill books)

Private Label Stage 3 Private Label Stage 4

Continue to review customer traffic levels, and actively test new initiatives to respond to changes in the business environment. Create a package of services that drives customer value at BOOKOFF.

(year end holidays) Corporate-wide campaigns (year-end holidays)

Book Pricing System (POS) Gold Purchasing

“29th of the month “29th of the month is Book Day” (sales promo)

• nline inventory

Link store and

• nline inventory

Success Story 24 P25 P26 P26

SLIDE 26

Purchases (left axis) Purchases for Resource Sales (right axis)

• 3. Business Strategy

Chain-wide Purchases: 90,000 Sales: 60,000

The Evolution of BOOKOFF(Stores)

Campaign Results

Purchases Sales

Higher purchases and sales of mobile phones stemming from TV commercials and

• ther measures to communicate our expanded business model.

Recognition of new model (phone sales) remains low; we will continue to take steps to increase awareness and uncover latent needs.

25 Mobile Phone Purchases, Sales

Units Units TV Commercials (Jul-Aug) Units

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

90 Directly Operated Stores

SLIDE 27

• 3. Business Strategy

The Evolution of BOOKOFF(Stores)

26

Publish winners of the Be Picture Book Award (Fuji TV KIDS) Sales started September 2012 (¥500 per unit) Publish under direction of Eikoh Inc. (major tutoring company) Sales started March 2013 (¥105 per unit)

Leverage 100 million annual customer transactions to develop private label products. Increase offerings to build better in-store customer experience.

SLIDE 28

• 3. Business Strategy

The Evolution of BOOKOFF(Online) Earnings Members (right axis) EC Sales (left axis) Ordinary income * Delivery Purchases: Service to purchase books, software received via delivery Delivery Purchases (left axis) * 10,000 people ¥100 million ¥100 million FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 (forecast) FY2007

Electronic Commerce site BOOKOFF Online Net sales ¥3.7 billion (25% YoY increase) Ordinary income ¥420 million; reached cumulative profit point since launch.

27

SLIDE 29

• 3. Business Strategy

Warehouse space and operations are most important keys to future business

• expansion. We plan to expand warehouse capacity over time, and redesign

warehouse operations.

28 9,256 6,612 10,909 15,207

Warehouse expansion to increase pre-owned goods inventory by 1.7 times; Inventory turnover up to 2.2 times.

Inventory turnover * (right axis) Pre-Owned Goods Inventory (left axis) * Annual net sales/Avg. Warehoused Value

Warehouse Space, Inventory/Turnover

No.2 Center (Operating since Jan 2013) Delivery purchase appraisal line capacity up 1.5 times Tomei Logistics Center

10,000 units

FY2008 FY2009 FY2010 FY2011 FY2012

Warehouse size

square meter square meter square meter square meter

The Evolution of BOOKOFF(Online)

SLIDE 30

Expand Comprehensive Reuse Models

• 3. Business Strategy

The Evolution of BOOKOFF The Evolution of BOOKOFF

Expand Comprehensive Reuse Models

New Businesses New Businesses

don’t let things go to waste

Mission

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

29

Stores Stores Online Online

SLIDE 31

Source (1997, 2002, 2007): Ministry of Economy, Trade and Industry, Industry Statistics, pre-owned Retail Sales(excluding cars, bicycles, books, antiques) (2009, 2010): Japan Reuse Affairs Association, Reuse Goods Annual Sales （2011）： Estimate based on Japan Reuse Affairs Association, Reuse Goods Annual Sales

Estimated reuse good market size: ¥457 billion, five times 1997 levels. Much room for growth in clothing and fashion goods categories, which should be major market drivers.

Expand Comprehensive Reuse Models

Market Size for pre-owned Retail Goods (excluding bicycles, books) New/Pre-Owned Market Size (by Product)

Source) Estimate based on Research Institute for Publications, Yano Research Institute Ltd. data

• 3. Business Strategy

30

Books Clothing Fashion Goods Watches Jewelry

goods market Pre-owned goods market New

¥100 million ¥100 million

SLIDE 32

• 3. Business Strategy

Expand Comprehensive Reuse Models

Clothing, fashion goods represent 60% of Group Reuse Business sales. Sales growing by double-digits annually with increase in number of BSB stores. Clothing, Fashion Goods 60.1%

Group Clothing, Fashion Goods Sales Reuse Net Sales Composition (vs. Segment Sales) 31

Jewelry, watches Other

Everyday goods, infant goods Sporting goods, golf equipment

Million yen

FY2008 FY2009 FY2010 FY2011 FY2012

SLIDE 33

Expand Comprehensive Reuse Models

Opened 7 BOOKOFF SUPER BAZAAR (BSB) stores during prior year (29 total*).

*As of March 31, 2013. AEON Suzuka counted as existing store (converted to BSB by increasing floor space) Vivit Minami Funabashi （Funabashi City, Chiba Prefecture） AEON Kuwana （Kuwana City, Mie Prefecture ） Tsunashima Tarumachi （Yokohama City, Kanagawa Prefecture ） Tachikawa Station North Exit （Tachikawa City, Tokyo） Matsudo Station East Exit （Matsudo City, Chiba Prefecture ） North Tenjin （Fukuoka City, Fukuoka Prefecture ） Luz Shonan Tsujido （Fujisawa City, Kanagawa Prefecture ）

• 3. Business Strategy

BSB Opened in FY2012

32

SLIDE 34

• 3. Business Strategy

All Stores Existing Stores

(Excluding PY New Stores)

Store Package Definition

Exterior

• No. of

Stores

Net sales

(million yen)

Ratio Net sales

(million yen)

Ordinary income

(million yen)

BOOKOFF SUPER BAZAAR （BSB）

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

29

（+8）

17,232

（+3,205）

30.1%

（+5.0%）

14,945 1,929 BOOKOFF

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

267

（+3）

34,753

（-1,054）

60.6%

（-3.5%）

33,941 3,841 BOOKOFF PLUS

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

22

（-2）

4,160

（-477）

7.3%

（-1.0%）

4,159 424 Reuse Stand- Alone

Reuse only stores

10

（-2）

1,167

（-209）

2.0%

（-0.4%）

1,167 186 Total 328

（+7）

57,312

（1,465）

100% 54,212 6,380

・As of March,2013 ・Of 8 new BSB, 1 converted by adding floor space * Excluding TSUTAYA, new issues, HARDOFF, Overseas

Composition by Package(FY 2012) Profits on Per-Store Basis

Expand Comprehensive Reuse Models

BSB and BO PLUS (fashion goods) net sales represent 37% of total sales (+4%)*

33

SLIDE 35

• 3. Business Strategy

FY 2013 BSB openings relatively limited (5 new). Working to develop human resources and pre-owned goods operational proficiency to support 10 openings/year in the future.

Small- Mid-Sized Format Management Capacity

Proficiency in fashion goods and

• ther non-book/non-software

product operations

New BSB Store Managers New BSB Store Product Manager BOOKOFF Existing BSB stores New BSB Large-Format Management

FY 2009 FY 2010 FY 2011 FY 2012 FY 2013

3 3 5 7 5

Moriguchi City, Osaka Prefecture Opened April 18 Sales floor space 2,813 square meter First BSB in Osaka (second in Kinki region)

Run-Up to New BSB Opening 34 BSB Openings

Expand Comprehensive Reuse Models

SLIDE 36

BOOKOFF

• 3. Business Strategy

Expand Comprehensive Reuse Models

1F During FY 2012, we reformatted existing BOOKOFF stores to BOOKOFF PLUS (comprehensive medium-format) stores. Transfer of BSB fashion goods expertise confirmed as effective in attracting customers. During FY2013, we will convert several (2-3) BOOKOFF stores to the BOOKOFF PLUS format as a test.

BOOKOFF PLUS Tomei Kawasaki Inter Store

35

Men's Fashion Men's Brands

Select High-End fashion goods

Ladies Brands Ladies Fashion ¥200 Counter

2F

*Fashion: Low priced items *Brand: Med-, high-priced items

SLIDE 37

The Evolution of BOOKOFF The Evolution of BOOKOFF Expand

Comprehensive Reuse Models

Expand

Comprehensive Reuse Models

New Businesses

don’t let things go to waste

Mission

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

• 3. Business Strategy

New Businesses

36

Stores Stores Online Online

SLIDE 38

New Businesses HUG ALL

Launching new businesses to extend our business domains for greater medium-term growth and to accomplish our mission as BOOKOFF for people who don’t let things go to waste.

• 3. Business Strategy

You can sell us anything. We'll find a new home for it.

37

SLIDE 39

Customer (Sell) Customer (Purchase)

Everything is fair game (even products not sold in BSB) All channels (not just individuals)

Mainly Targets Individuals Mainly Targets Individuals

• 3. Business Strategy

All channels (not just individuals) Become a part of the customer’s everyday lifestyle

Products are defined for existing businesses (stores); Hugall deals in ALL products—no limits, no exceptions. Use every sales channel that allows for maximum cash generation.

38

New Businesses HUG ALL

SLIDE 40

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

• 3. Business Strategy

39

We forecast an operating loss of ¥230 million for the first year, considered as advance investment related to test rollout. Between years 2 and 3, we will establish a framework and expertise allowing us to build a business generating ¥1 billion in ordinary income beginning in 10 years.

New Businesses HUG ALL

SLIDE 41

Net sales ¥ 4-5 bln

• 3. Business Strategy

FY 2012

The BOOKOFF Business in Five Years

Non-Stores Stores HUGALL BOOKOFF Online

5 Years from Now

Comprehensive Stores

BSB BO PLUS BOOKOFF Stand- Alone Stores

Net sales ¥3.7bln Net sales ¥ 8-10 bln

BSB 29 Stores BO PLUS 22 Stores BSB 50-60 Stores BO PLUS 30-50 Stores BO 267 Stores

Existing store net sales 95% YoY

BO 200-240 Stores

Existing store net sales 100% or higher YoY

Conversion to BO PLUS Replace with new BSB stores

40

SLIDE 42

• 4. Prior Period (FY 2012) Financial Data

SLIDE 43

FY2011 Ratio FY2012 Ratio YoY

• Vs. plan

Net sales

75,716

－

76,670

－ 101.3%

• 3,329

Gross profit

43,301

57.2%

44,714

58.3% 103.3% SG&A

39,868

52.7%

42,799

55.8% 107.4% Operating income

3,432

4.5%

1,914

2.5% 55.8%

• 1,285

Ordinary income

3,803

5.0%

2,366

3.1% 62.2%

• 1,133

Extraordinary gain

190

0.3%

－

－ － Extraordinary loss

547

0.7%

483

0.6% 88.4% Net income

1,867

2.5%

1,058

1.4% 56.7%

• 641

EPS (yen)

102.41yen 57.30yen

• 45.11yen

Consolidated Statements of Income

Unit: million yen

• 4. Prior Period Financial Data

42

SLIDE 44

17,711 18,379 18,819 18,435 17,957 18,781 19,306 19,671 18,440 18,549 19,647 20,033 16,000 17,000 18,000 19,000 20,000 21,000

1Q 2Q 3Q 4Q

百万円 2011.3期 2012.3期 2013.3期

Performance Trends・By Quarter

Performance Trends （Recent 5-Years）

• 4. Prior Period Financial Data

Ordinary income (right axis) Net sales (left axis) Net Income (right axis)

Net sales Ordinary income

43 By Quarter （Recent 3-Years）

Million yen Million yen Million yen FY 2010 FY 2011 FY 2012 FY 2010 FY 2011 FY 2012

FY2008 FY2009 FY2010 FY2011 FY2012

SLIDE 45

Segment Net Sales, Operating Income

BOOKOFF

5,197

10.0%

3,395

6.5% 65.3%

Reuse

200

1.8%

465

3.7％ 232.3％

Packaged Media

19

0.2%

• 113

－ －

Other

• 50

－

• 14

－ －

Corporate

• 1,934

－

• 1,819

－ －

Total Operating Income

3,432

4.5%

1,914

2.5% 55.8%

25 FY 2011 4Q Cumul. Ratio Profit Rat. FY 2012 4Q Cumul. Ratio Profit Rat. YoY

Directly operated store sales

Online sales Sales to Franchisees Other services

46,222 2,966 734 2,104 61.0% 3.9% 1.0% 2.8% 46,018 3,713 702 2,049 60.0% 4.8% 0.9% 2.7% 99.6% 125.2% 95.7% 97.4% BOOKOFF

52,027

68.7%

52,484

68.5% 100.9%

Reuse

11,117

14.7%

12,548

16.4% 112.9%

Packaged Media

12,142

16.0%

11,271

14.7% 92.8%

Other

429

0.6%

366

0.5% 85.4%

Total Net Sales

75,716

100%

76,670

100% 101.3% Net sales Operating income

【BOOKOFF 】 （Directly operated store） ・ BOOKOFF Directly operated store Operations （Online sales） ・ Internet Sales BOOKOFF Online Operations （Sales to Franchise） ・ Product and Consumable Sales to Franchise （Other services） ・ Royalty Revenues from Franchise 【Reuse 】 ・ Reuse Store Operations for Products other than BOOKOFF(fashion goods, etc.) ・ HARDOFF Store (FC) Operations 【Packaged Media 】 ・ TSUTAYA Store (FC) Operations ・ New book stores（Aoyama Book Center, etc.） Operations 【Other 】 ・ Store operations not included above ・ Planning, construction for stores (inside/outside) ・ New Hugall Business (beginning FY2013)

Segment Definitions

• 4. Prior Period Financial Data

44

Unit: million yen Unit: million yen

SLIDE 46

12,148 12,799 12,230 12,823 12,460 13,173 12,730 13,663 12,788 13,058 12,782 13,854 11,000 12,000 13,000 14,000

1Q 2Q 3Q 4Q

百万円 2011.3期 2012.3期 2013.3期 2,296 2,178 2,930 2,356 2,424 2,509 3,327 2,856 2,801 2,664 3,747 3,335 1,000 2,000 3,000 4,000

1Q 2Q 3Q 4Q

百万円 2011.3期 2012.3期 2013.3期 907 1,183 844 1,788 1,133 1,450 816 1,796 1,136 747 257 1,252 500 1,000 1,500 2,000

1Q 2Q 3Q 4Q

百万円 2011.3期 2012.3期 2013.3期 ▲ 88 ▲ 275 268 ▲ 20 ▲ 44 ▲ 111 268 87 91 ▲ 250 477 147 ▲ 300 ▲ 200 ▲ 100 100 200 300 400 500

1Q 2Q 3Q 4Q

百万円 2011.3期 2012.3期 2013.3期

BOOKOFF Reuse

Segment Net Sales, Operating Income by Quarter

• 4. Prior Period Financial Data

Net sales Operating income

45

Net sales Operating income

FY 2010 FY 2011 FY 2012 FY 2010 FY 2011 FY 2012 Million yen Million yen FY 2010 FY 2011 FY 2012 FY 2010 FY 2011 FY 2012 Million yen

Million yen

SLIDE 47

FY 2011 Ratio FY 2012 Ratio Change Cash/deposits

5,851

15.4%

4,630

11.7%

• 1,220

Inventories

9,560

25.2%

10,821

27.4%

+1,261

Current assets

18,766

49.4%

19,351

49.0%

+585

Noncurrent assets

19,217

50.6%

20,103

51.0%

+886

Total assets

37,983

100.0%

39,455

100.0%

+1,471

Current liabilities

14,212

37.4%

14,037

35.6%

• 174

Noncurrent liabilities

9,384

24.7%

10,167

25.8%

+782

Total liabilities

23,596

62.1%

24,205

61.3%

+608

Net assets

14,386

37.9%

15,249

38.7%

+863

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

Interest-bearing debt

14,484

38.1%

14,851

37.6%

+366

Unit: million yen

Consolidated Balance Sheet

• 4. Prior Period Financial Data

46

SLIDE 48

FY 2011 FY 2012 Change Income before income taxes

3,446 1,882

• 1,564

Depreciation & amortization/ Amortization of goodwill

2,409 2,391

• 17

Disaster loss

• 130

－ +130

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

439 365

• 73

Change in current assets/liabilities

386

• 1,497
• 1,883

Tax payments, refunds

• 1,567
• 1,278

+288

Operating Activities

4,983 1,863

• 3,119

Change in noncurrent assets & guarantee deposits

• 1,195
• 2,103
• 908

Other

• 109
• 87

+22

Investing Activities

• 1,304
• 2,190
• 885

Operating activities + investing activities

3,678

• 327
• 4,005

Financing activities

• 4,336
• 905

+3,430

Cash & cash equivalents, beginning of period

6,505 5,851

• 654

Cash & cash equivalents, end of period

5,851 4,630

• 1,220

Unit: million yen

Consolidated Statements of Cash Flow

• 4. Prior Period Financial Data

47

SLIDE 49

• 5. Supplementary Materials

SLIDE 50

Company Profile

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 11 subsidiaries, 1 affiliated company Number of stores 1,059 stores(including 567 FC stores) Employees 1,051 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,2013

Key Performance Indicators /Dividend Policy

Key Performance Indicators Stable and sustainable growth in sales and profit Ordinary income of ¥10 billion ROA（Ordinary income ） of 15%

Dividend Policy

Target 25% payout ratio based on consolidated net income

• 5. Additional Information

49

SLIDE 51

・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 ・Faster BOOKOFF SUPER BAZAAR Openings ・Large-scale urban BOOKOFF Openings ・New Products (hobby goods, trading cards, mobile phones, private label goods)

Store Packaging Evolution

Overseas Store First BOOKOFF Store

BOOKOFF: Large-scale urban stores

BOOKOFF Used Stores

(comprehensive, large-format)

Focus on suburban locations

1,046 stores in Japan, 13 stores overseas BOOKOFF (Domestic) 891 stores BOOKOFF (Overseas) 13 stores Reuse Business Stores 112 TSUTAYA, New Issues, Other 43 stores

(including 567 FC stores)

1,046 stores in Japan, 13 stores overseas BOOKOFF (Domestic) 891 stores BOOKOFF (Overseas) 13 stores Reuse Business Stores 112 TSUTAYA, New Issues, Other 43 stores

(including 567 FC stores) As of March,2013

• 5. Additional Information

50

SLIDE 52

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

BOOKOFF SUPER BAZAAR

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.

• 5. Additional Information

51

SLIDE 53

BOOKOFF SUPER BAZAAR

• 5. Additional Information

52

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

① Low prices

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

③ Sales floor

Staff don’t push customers to buy.

④ Casual atmosphere

Unmatched volume of products & variety of brands.

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)

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.

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

Four Tactics to Offer an Unmatched Breadth of Options

SLIDE 54

BOOKOFF SUPER BAZAAR

• 5. Additional Information

53

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

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

SLIDE 55

10 20 30 40 50 60

BOOKOFF SUPER BAZAAR

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)

• Q1. Have you ever used a store’s

purchasing service?

• Q2. What would you do with

belongings if BSB weren’t here?

Throw away （57%）

• 5. Additional Information

54

SLIDE 56

BOOKS TO THE PEOPLE 2012

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

• 5. Additional Information

55

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

2,124 books

BOOKOFF Chain

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

Area Affected by the Disaster

(Fukushima Prefecture , Miyagi Prefecture)

41 Chain (Group, FC) Employee Volunteers