Medium-term Business Plan

Last updated on April 18, 2017

Group's Vision

J.FRONT RETAILING Co., Ltd. (“JFR”) has prepared its FY2017–2021 JFR Group Medium-term Business Plan, drawn up with the aim of helping to make the new Group’s Vision a reality, as summarized below.
Upon its establishment in 2007 through the management integration of Daimaru, Inc. and Matsuzakaya Holdings Co., Ltd., the JFR Group set forth its vision phrased as “we will establish a status as a leading Japanese retail company both in terms of quality and quantity with the department store business as our core.”
After that, we steadily expanded into areas of business other than department stores acting as a multifaceted retailer operating multiple businesses. This involved actively pursuing M&A deals, such as by making StylingLife Holdings Inc. (“SLH”) an equity method associate in 2011, and making PARCO Co., Ltd. a consolidated subsidiary in 2012.

Meanwhile, substantial changes emerging in the business environment have caused us to view our present situation as a turning point with respect to drastically altering the course being taken by Group management, given that we are now finding it more difficult to generate growth by remaining on the path prescribed in terms of our current business model.
We anticipate developing trends that involve increasingly diverse lifestyles stemming from Japan’s dwindling birthrate and growing aging population along with its shifting family dynamics. We also anticipate trends that involve people pursuing increasingly diverse means of seeking enjoyment amid factors such as shifting patterns of consumption where people are opting for experiences rather than goods, and progress being made with information and communications technologies (ICT). Amid such trends, the JFR Group has been giving thought to the notion of what it is that makes people happy, and has consequently drawn up its new Group Vision phrased as

“Create and Bring ‘New Happiness’ to Your Life.”

This new vision reflects our commitment to helping people lead emotionally fulfilling lives by strategically seeking expansion in current fields of business and transforming our existing businesses in hopes of providing new forms of value with respect to lifestyles as well as means of seeking enjoyment.
With the Group’s Vision pointing us in the direction we ought to be headed, we aim to substantially transform the Group while also achieving discontinuous growth.

Positioning and basic policies of the Medium-term Business Plan

Over the duration set for the new Medium-term Business Plan, the five years from FY2017–2021, we intend to complete large development projects that we launched during the term of the FY2014–2016 Medium-term Business Plan, and then expect to start generating returns from those projects. At the same time, we regard the plan as comprising a “phase of Group structural transformation” involving a turning point during which the course taken by Group management will be drastically altered to achieve discontinuous growth based on the new Group Vision. Accordingly, we aim to achieve ROE of 8% in fiscal 2021.
Under the plan, we will take one step away from our approach as a multifaceted retailer operating multiple businesses to act as a multifaceted services retailer, thereby expanding our business domain to encompass endeavors in new fields extending beyond the retail industry framework. Meanwhile, we will actively reshuffle our portfolio of businesses by accelerating the identification of unprofitable business fields and other efforts.
Through our efforts to strengthen the Group’s growth strategy toward its structural transformation and our foundations of business that lend support to the growth strategy, we will work toward ensuring growth sustainability of the Group and increasing its medium- to long-term corporate value.

Positioning and overall structure of the FY2017–2021 Medium-term Business Plan

Quantitative management objectives and financial policies

Transition to the International Financial Reporting Standards (IFRS)

  • ・The Group has decided to apply the International Financial Reporting Standards (IFRS) voluntarily beginning in March 2017, which marks the start of the new Medium-term Business Plan. We are shifting to the IFRS framework in the interest of implementing effective management based on appropriate asset evaluation, applying business management that gives emphasis to the profit of the current period and ensuring accountability to domestic and overseas investors by improving the international comparability of financial information.
  • ・Going forward, the JFR Group will release earnings forecasts and financial results, including the quantitative management objectives set forth in the Medium-term Business Plan based on disclosure requirements in the IFRS.

Quantitative management objectives

  • ・By carrying out initiatives geared to making the new Group’s Vision a reality, we aim to achieve operating profit of ¥56.0 billion, operating profit margin of 10%, and ROE of 8% by fiscal 2021, the final fiscal year of the Medium-term Business Plan.
  FY2021 targets FY2016 results (approximate)*
Consolidated operating profit (IFRS) ¥56.0 billion ¥41.7 billion
Consolidated operating profit margin (IFRS) 10.0% 9.2%
Consolidated ROE (net income/shareholders’ equity) 8.0% or higher 7.6%

*The results for FY2016 are approximate values and it is possible that they will change depending on the result of the accounting audit.

  • ・In monitoring our key financial indicators we will focus primarily on ROE for capital efficiency, operating profit for business profitability, free cash flows (FCF) for profitability and stability, and total equity attributable to owners of the parent to total assets (equity ratio) for financial soundness.

Financial policies

  • ・Over the five-year period of the plan, we aim to generate operating cash flows of at least ¥260.0 billion, of which ¥200.0 billion will be allocated mainly to capital investment, and otherwise channeled to strategic growth investment that will include expanding new business toward rebuilding our business portfolio. On top of that, we will provide shareholder returns on the basis of maintaining a consolidated dividend payout ratio of at least 30% and also consider the option of purchasing treasury shares as appropriate
  Accumulated results of FY2017–2021
Operating cash flows ¥260.0 billion or more
Capital investment and growth-oriented investment ¥200.0 billion
Shareholder returns We will consider the option of purchasing treasury shares as appropriate, on the basis of maintaining a consolidated dividend payout ratio of at least 30%.

Approach to the business portfolio

  • ・Beginning in fiscal 2017, JFR’s business segments include four reportable segments – the Department Store Business, PARCO Business, Real Estate Business and Credit and Finance Business.
  • ・Around 70% of the share of our business will be conducted by the Department Store Business and the PARCO Business, which up to now have accounted for nearly 90% of the Group’s operating income. Meanwhile we will fortify the Real Estate Business and expand into new fields of business, thereby increasing the share of those operations.

Image of transformation of the business portfolio