FY2008 First-Half Consolidated Business Results WBG WEST 16F 2-6 NAKASE MIHAMA-KU CHIBA JAPAN

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1 First-Half Consolidated Business Results

2 Business performance Highlights of First-Half 1. High growth in net sales and operating income -Net sales 4,857million+28.1%YoY -Operating income 983million+30.0%YoY 2. Number of members exceeded one million -Results from magazine ad 4. ZOZOWALKER 1st anniversary -Increace of bloggers in ZOZOWALKER Men 26, Female 22,Total Summer sales strong -Store Operating &Administration Business 539million+13.9%YoY -Store PlanningDevelopment Business 182million+21.2%YoY 3. Strengthen cooperation with the fashion magazine -Collaboration with fashion magazineps -Setting up new site working with magazine -Increasing use of Arrival Alert Services

3 Business performance Consolidated Business Results, First Half million First Half First Half YoY % Initial forecast Amended forecast Vs Amended Forecast% Contributing factors Net Sales steady growth as planned Operating income Reduction in outsoucing costs Ordinary income Increace in deposit interest Net income

4 Business performance Net sales million Others Store Operations & Administration Business Store planning & Development Business High growth in net sales -46.7% progress to full-year forecast FY2003 FY2004 FY2005 FY2006 First-half

5 Business performance Business Performance Net sales (quaterly) million Others Store Operations & Administration Business Store planning & Development Business Net sales +25.1%YoY -Net sasles downqoq due to early summer sale 1Q 3Q 4Q 1Q

6 Business performance Transaction Value/EC Business Store planning&development Business Store Operations&Administration Business billion FY2002 FY2003 FY2004 FY2005 FY2006 First-half

7 Business performance Transaction Value/EC Business (quaterly) Store planning&development Business Store Operations&Administration Business Transaction value billionyoy +32.5%YoY billion 1Q 3Q 4Q 1Q

8 Business performance Selling General and Administrative Costs Selling genel and administrative costs Personnel costs 1Q First- Half First- Half Charge Vs Vs A-B Vs Amount NetSales Amount NetSales Amount NetSales Amount A B C Vs NetSales D Charge C-D million Contributing factors Increace in personnel +13 compared to Jun Delivery costs Collection costs Advertising costs Efficiency of advertising Outsoucing costs Others Payroll outsoucing +0.5%YoY Depreciation and amontization+0.5%yoy

9 Business performance Operating Income and Operating Income Rate Operating income Operating income rate% million FY2003 FY2004 FY2005 FY2006 First-half High growth in operating income -47.3% progress to full-year forecast

10 Business performance Operating Income and Operating Income Rate (quaterly) Operating income million Operating income rate% Operating income rate as planned +0.2%YoY 1Q 3Q 4Q 1Q

11 Business performance Cash Flows million YoY 1Q QoQ Contributing factors Cash flows from operating activities Cash flows from investing activities Aquisition of tangible fixed assets Cash flows from financing activities Dividend payments Cash and cash equivalents at end of quater

12 Achievement transition - Members Number of Members Topped one million member -Resulting from magazine adzozogallery members FY2003 FY2004 FY2005 FY2006 1Q

13 Achievement transition - Members Fact data analysis NetIncreasein Members (quaterly) members Steady net increase of 100,000 Members during quaten -Mainly through ZOZOGALLERY FY2002 FY2003 FY2004 FY2005 FY2006

14 Achievement transition - Members Number of Active Members (quaterly) Active member=member who had purchased more than once per year members -More than 20% of active members are 5 times + shoppers 4Q FY2006 1Q 3Q 4Q 1Q

15 Achievement transition - Members Member Demographics members Male / female Area age Age structure

16 Achievement transition - Members Page Views per Month ( total ) Total PC Mobile Apr Jun Aug Oct Dec Feb Apr Jun Aug

17 Achievement transition - Members Average purchase unit price (quaterly) Average purchase unit price:transaction value/number of shipments 4Q FY2006 1Q 3Q 4Q 1Q

18 Achievement transition - Members Yearly average purchased price per an active member (quarterly) FY2006 4Q 1Q 3Q 4Q 1Q

19 Achievement transition - Members Number of Shipping (quarterly) +34.5%YoY 4Q FY2006 1Q 3Q 4Q 1Q

20 Earnings forecast for Consolidated Business Forecasts for Net sales Operating income Ordinary income Net income Net income per share Dividend per share billion 2.08 billion 2.08 billion 1.16 billion 9, ,410 YoY% Breakdown of net sales EC business Others Total Segment Store Planning & Development Business Store Operation & Administration Business 6.56 billion 3.51 billion 0.33 billion billion YoY%

21 Key Points of Second-Half Key Points of Second-Half 1. Beginnnig Arrival Alert Service 2. Opening new shops -Loree Rodkin, scheduled to open on Oct.22 -SHIPS KIDS, scheduled to open on Nov.5 -Love&Peace&Money, scheduled to open on Nov.5 3. Establishing new SNS 4. Acquiring large-scale advertising 5. Acquiring new projects in BtoB business

22 Key Points of Second-Half What is Arrival Alert Service? Starting from Oct.2008 Costomers request items out of stock. When the stock arrives,notifications Oct.1 to Oct.20 Member 1.Number of people who request No member Total 2.Number of requests 3.Total value of items requested (excluding tax)

23 Reference data

24 Present problems Possible to expand the demand ZOZO member and purchaser are increasing Current issues Product supply Possible for expanding of demand. (Steadily increasing ZOZO members and purchasers) Product supply to satisfy demand is necessary Need the continuous product supply from brands carried by ZOZOTOWN and the reinforcement of a fulfillment function Number of the apparel brands Limitation for the expansion of handling brands in ZOZOTOWN because of adaptability with ZOZO brand Need to explore business opportunities with the brands in other fashion areas or markets which are not covered by ZOZO ZOZO user questionnaire High Satisfaction Law Importance High Site design Goods variation Goods stock Size information Goods photo Convenience of the site Point saving rate Point usage Packing form Shipping charge Payment method Returning goods Customer support Site Q&A Mail magazine Convenience of the mobile site Period of questionnaire 06/22/ /25/2007 Number of respondents 27,321 Display example of out of stock items

25 Future strategies 1. Expansion of EC business 2. Diversification of the earnings model B to B business 3.Entry into new areas /markets Increase ZOZO members Reinforce ZOZO s media value : Start open-network SNS service (autumn 2008) Renewal of mobile website Reinforce the merchandising Expand business with the brands carried by ZOZO Increase product supply from the brands (especially sales on commission type) Cooperate inventory information Support apparel brand s original EC site (system development, site design, fulfillment etc.) Brands carried by ZOZO Establish media business Support apparel brand s original EC site (system development, site design, fulfillment etc.) Brands not carried by ZOZO Feasibility study Another EC site (non-apparel products, overseas markets etc.)

26 Future strategies Business development Another E-commerce site Start of support for manufacturers own EC open-network SNS service Renewal mobile site Including the budget of 3 Entry into New Areas /Markets Diversification of the Earnings Model B to B business Media Business e.g. advertising income, etc. 2 1 Expansion EC business Fiscal year

27 Future strategies BtoC EC revel 1 3 Existing business partner (existing products, market etc.) 2 New business partner (new products, market etc.) BtoB

28 Future strategies Positioning of START TODAY in the Apparel EC Market Vertical axis: brands Horizontal axis: EC site characteristics (number of brands carried) BtoC BtoB Apparel EC Market (present) High end Apparel EC Market (future) High end The number of brands carried few Single brand site The number of brands carried many shopping mall The number of brands carried few Single brand site The number of brands carried many shopping mall Volume Volume

29 Future strategies The significance of support business for manufacturers own EC site Production and management of products photo and information Central control of inventory for web sites Logistics management of inventory for web sites Original shop real-life Sharing customer information between web shops and real-life shops Pulling in customers to original EC site Acquire and analyze customer information and purchase history Apparel manufacturer brand New own EC site Customer Information/ inventory ZOZOBASE Secure merchandise supply Reduce the loss of sales opportunities Raise business efficiency

30 Business Outline SOZO : Imagination& SOZO : CreationInternet Business Domain : High-sense Fashion 7 Services: EC, Navigation, Q&A, Blog, SNSSocial Networking Service, CSRCorporate Social Responsibility, GALLERY EC BLOGS Fashion & Art leaders blog SNS Closed residence type NAVI Japanese real apparel shops navigation site GALLERY Wallpaper download service for PCs and cell phones Q&A Knowledge aggregation of users CSR Thank you message & donation

31 Business Outline A summary and a characteristic of each service. The largest hi-sense fashion shopping mall System, design, logistics --- originally developed and operated Solid relationship with the brands carried Over 3100 real-life apparel shops introduction Variety of information from shops ex. over 44,000 photos of coordinated styles recommended by shops Gathering customers from real-life shops Social networking service Virtual residence for users Q&A services among users Fashion & art industry leaders blogs Thank you message service 10 / message donation PC wallpaper & screen saver download service

32 Business Outline Our Mission 678 brands high fashion brands 220 employees average age ,500 issued shares Stockholders Corporate Principles Make the world a better place, and Make the people smile all over the world 3,600 shops from all over the country 1.04 million fashion-oriented customers

33 Business Outline Our Strengths The largest apparel EC in Japan Dominant position in high-fashion field Holding of our own EC-related functions : System, Design, Logistics etc. Accompanied by original fashion information media - ZOZOWALKER, ZOZORESIDENSE, ZOZONAVI, ZOZOQ&A, ZOZOARIGATO, ZOZOGALLARY Very loyal members with a fifty-fifty male-to-female ratio Solid relationship with business partners : ex. Inventory data connection

34 Structure of corporate profits EC Business Store Operation & Administration Business Operating 59 online shops, such as United Arrows, BEAMS etc., in ZOZOTOWN on commission basis without any inventory risk. Sales = Transaction value on each shops commission rate Store Planning & Development Business Operating 33 original online shops in ZOZOTOWN. Sales = Transaction value on each shops

35 Structure of corporate profits Others Media Business Sell internet advertising spots in ZOZORESORT. Sales = Advertisement charge Credit Card Business Issue ZOZOCARD tied-up with Pocketcard co., Ltd. Sales = cashing balance commission rate + Shopping volume commission rate Others Initial store opening charge B to B business Support for manufacturers' own EC May 2008: Established subsidiary (Start Today Consulting, Co., Ltd. ) Sales = Each manufacturer's product volume consignment commission rate