JINS / 3046 COVERAGE INITIATED ON: LAST UPDATE:

Transcription

1 COVEAGE INITIATED ON: Shared esearch Inc. has produced this report by request from the company discussed in the report. The aim is to provide an owner s manual to investors. We at Shared esearch Inc. make every effort to provide an accurate, objective, and neutral analysis. In order to highlight any biases, we clearly attribute our data and findings. We will always present opinions from company management as such. Our views are ours where stated. We do not try to convince or influence, only inform. We appreciate your suggestions and feedback. Write to us at sr_inquiries@sharedresearch.jp or find us on Bloomberg. esearch eport by Shared esearch Inc.

2 esearch eport by Shared esearch Inc. INDEX How to read a Shared esearch report: This report begins with the trends and outlook section, which discusses the company s most recent earnings. First-time readers should start at the business section later in the report. Key financial data ecent updates Highlights Trends and outlook Monthly trends (JINS) Quarterly trends and results Full-year company forecasts (initial forecast) Long-term outlook Business Business description Strengths, weaknesses Market and value chain Strategy Historical financial statements Income statement Balance sheet Cash flow statement Other information News and topics History Top management Employees Major shareholders Dividends and shareholder benefits Investor relations Company profile /63

3 esearch eport by Shared esearch Inc. Key financial data Income statement FY8/6 FY8/7 FY8/8 FY8/9 FY8/1 FY8/11 FY8/12 FY8/13 FY8/14 FY8/19 (JPYmn) Parent Parent Parent Parent Parent Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. FY Est. Total sales 3,94 5,12 6,222 7,434 1,64 14,575 22,614 36,554 36,15 4,699 46,189 5,451 54,872 62,8 YoY 36.6% 29.5% 22.% 19.5% 42.6% 37.4% 55.2% 61.6% -1.1% 12.6% 13.5% 9.2% 8.8% 14.4% Gross profit 2,61 3,519 4,395 5,333 7,522 1,688 17,15 27,445 26,194 3,324 34,528 37,942 41,455 47,66 YoY 41.8% 34.8% 24.9% 21.4% 41.% 42.1% 59.2% 61.3% -4.6% 15.8% 13.9% 9.9% 9.3% 15.% GPM 66.2% 69.% 7.6% 71.7% 7.9% 73.3% 75.2% 75.1% 72.5% 74.5% 74.8% 75.2% 75.5% 75.9% Operating profit ,84 2,634 6,223 2,973 3,585 3,683 5,42 6,71 7,25 YoY 19.% -1.5% -67.2% -35.4% 33.4% 74.7% 143.1% 136.3% -52.2% 2.6% 2.7% 46.7% 12.4% 19.4% OPM 17.5% 13.3% 3.6% 1.9% 5.9% 7.4% 11.6% 17.% 8.2% 8.8% 8.% 1.7% 11.1% 11.5% ecurring profit ,53 2,552 5,869 2,929 3,481 3,64 5,227 5,627 6,84 YoY 18.% -.2% -73.4% -28.9% 371.2% 75.3% 142.4% 13.% -5.1% 18.8% 3.5% 45.% 7.7% 21.6% PM 17.1% 13.2% 2.9% 1.7% 5.7% 7.2% 11.3% 16.1% 8.1% 8.6% 7.8% 1.4% 1.3% 1.9% Net income ,9 3,419 1,245 1,92 1,98 2,767 3,97 3,9 YoY 31.8% 2.6% % 183.7% 213.8% -63.6% 52.8% 4.1% 39.7% 11.9% 25.9% Net margin 7.6% % 2.6% 4.8% 9.4% 3.4% 4.7% 4.3% 5.5% 5.6% 6.2% Per share data (JPY; adjusted for stock splits) Shares issued (year-end; ') 2,48 2,48 2,48 2,48 2,48 2,48 23,98 23,98 23,98 23,98 23,98 23,98 23,98 - EPS EPS (fully diluted) Dividend per share Book value per share Balance sheet (JPYmn) Cash and cash equivalents 1, ,163 6,362 3,245 4,889 4,349 6,86 5,531 Others 693 1,75 1,334 1,429 1,542 2,513 4,822 7,528 6,573 7,535 8,15 8,836 1,19 Total current assets 1,75 1,743 1,559 1,94 1,968 3,41 1,985 13,889 9,818 12,424 12,499 15,696 15,721 Tangible fixed assets ,1 1,339 1,42 2,115 3,128 4,555 6,4 7,231 7,68 7,893 8,725 Investments and other assets ,61 1,415 1,681 2,479 4,22 3,79 4,334 4,799 5,142 Intangible fixed assets ,112 1,593 1,867 1,848 Total fixed assets 878 1,167 1,851 2,262 2,52 3,693 5,56 7,725 1,97 12,51 13,68 14,559 15,716 Total assets 2,641 2,919 3,413 4,167 4,47 6,734 16,41 21,615 2,788 24,662 26,232 3,354 31,499 Accounts payable ,458 1,215 1,655 1,484 Short-term debt ,595 1,765 1,459 2,184 1,935 2,286 1,592 Others ,347 2,513 4,95 4,23 4,678 4,495 5,386 5,376 Total current liabilities ,255 1,368 1,662 2,86 4,894 7,613 6,328 8,32 7,645 9,327 8,452 Long-term debt ,814 1,17 1, ,855 1,56 1,225 Others ,428 1,498 1,95 2,114 Total fixed liabilities ,35 2,194 1,869 2,42 2,362 3,353 3,51 3,339 Total liabilities ,35 2,142 2,235 4,156 7,88 9,482 8,37 1,682 1,999 12,838 11,792 Net assets 1,962 2,268 2,63 2,24 2,236 2,578 8,953 12,132 12,419 13,98 15,232 17,515 19,77 Total interest-bearing debt , ,837 3,49 2,872 2,538 3,118 3,79 3,846 2,817 Cash flow statement (JPYmn) Cash flows from operating activities ,169 4,324 2,86 4,311 2,449 6,339 4,742 Cash flows from investing activities ,591-2,237-2,95-4,255-2,848-2,629-2,46-3,64 Cash flows from financing activities ,147 6,73-1,191-1, ,548-2,996 Financial ratios OA (P-based) 33.5% 24.2% 5.7% 3.4% 13.9% 18.8% 22.4% 31.2% 13.8% 15.3% 14.2% 18.5% 18.2% OE 27.8% 18.3% -5.2% -.9% 1.9% 16.% 18.9% 32.4% 1.1% 14.4% 13.6% 16.9% 16.6% Equity ratio 74.3% 77.7% 6.4% 48.6% 5.% 38.3% 55.8% 56.1% 59.7% 56.7% 58.1% 57.7% 62.6% Source: Shared esearch based on company data Note: Figures may differ from company materials due to differences in rounding methods. 3/63

4 esearch eport by Shared esearch Inc. ecent updates Highlights On December 5, 218, JINS Inc. announced monthly sales data for November 218. On November 13, 218, Shared esearch updated the report following interviews with the company. On November 5, 218, the company announced monthly sales data for October 218; see the Monthly trends section for details. On October 12, 218, the company announced earnings results for full-year ; see the results section for details. On October 5, 218, the company announced monthly sales data for September 218. On September 13, 218, the company announced it will change the company name to JINS Holdings, Inc. and move to a holding company structure as of July 1, 219. The purpose of this action is for the company to achieve further growth as diversification among its group companies progresses. To this end, the company will undertake the following initiatives: a) Strengthen the function of management strategy planning to optimize group s management resources and improve brand power, b) Clarify profitability and management responsibility at each group company, and c) Accelerate decision-making at each group company to achieve strategic and flexible business operations. The company does not expect any material impact on its consolidated earnings results from this action. On September 12, 218, the company announced the opening of the first JINS store in Hong Kong. The company announced the launch of its business in Hong Kong, its fifth overseas base, with the first JINS store slated for opening on September 28 in a large shopping mall apm. Prior to Hong Kong, the company opened its first store in China in December 21 (133 stores as of end August 218), North America in April 215 (five), Taiwan in November 215 (21), and the Philippines in April 218 (two). There are 349 JINS stores in Japan. JINS has decided to venture into Hong Kong based on the following reasons. Anticipated market growth in Hong Kong: With a population of roughly 4,, Hong Kong has a GDP per capita of roughly twice that of Taiwan and has maintained a growth rate higher than that of Japan; JINS track record in overseas business: JINS has succeeded in increasing its influence in all overseas regions it has ventured into so far; and To further accelerate globalization of its business For previous releases and developments, please refer to the News and topics section. 4/63

5 esearch eport by Shared esearch Inc. Trends and outlook Monthly trends (JINS) Sales growth for comparable stores (left) and all stores (right) 3% 2% FY8/14 FY8/19 4% 3% FY8/14 FY8/19 1% 2% - 1% -1% - -2% -1% -3% -2% Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Comp. stores Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Q2 Q4 1H 2H FY FY8/8 2.4% -1.3% -5.8% 4.% -6.6% -8.8%.1% -8.8% -1.7% -7.8% -5.6% -7.5% -4.6% -4.1% -6.8% -5.6% FY8/9-2.6% -11.1% -1.5% -13.2% 3.8% -8.3% -7.8% -5.1% 6.% 2.9% 9.9% 15.9% -11.5% -8.2% 3.7% -1.9% FY8/1 33.5% 51.1% 36.1% 4.7% 41.1% 42.5% 35.3% 5.4% 36.1% 29.6% 2.2% 21.2% 4.1% 4.8% 45.3% 46.% FY8/11 9.4% 3.3% 8.4% 15.1% 3.1% 5.7% 1.2% 12.7% 3.3% 5.9% 12.9% 14.7% 16.3% 7.9% 5.7% 11.5% 11.5% 8.6% 1.% FY8/ % 7.9% 5.9% 3.% 9.3% 28.1% 33.1% 14.9% 23.2% 7.4% 56.2% 41.7% 13.7% 11.6% 23.2% 55.1% 12.6% 4.3% 27.6% FY8/ % 17.8% 68.3% 69.8% 5.3% 51.9% 41.3% 23.8% 33.7% 6.1% -3.5% 13.3% 45.6% 57.2% 32.9% 5.1% 51.9% 16.9% 31.4% FY8/ % -8.1% -24.5% -26.3% -22.2% -25.1% -1.9% -28.4% -23.6% -25.1% -22.1% -26.3% -17.6% -24.5% -17.7% -24.6% -21.5% -21.2% -21.4% -23.3% -21.5% -1.2% -2.8% -16.4% -7.% -23.3% 19.8% 23.3% 1.% 15.5% 12.9% -18.5% -15.4% 3.2% 12.9% -16.8% 7.9% -4.1% 11.5% 19.9% 4.3% 15.2% 11.8% 8.8% 3.8% -.4% -8.3% -1.1% 4.9% -1.2% 11.6% 12.% -2.1% 1.% 11.8% -.4% 4.9% 2.5% 8.3% 3.8% 5.6% 3.2% 1.7%.9% 5.8% 2.6% 3.4%.2% 2.5% 4.9% 3.6% 3.1% 1.9% 4.2% 2.5% 3.3%.4% -3.5% 1.3% -2.6% 1.7% 2.2% 1.1% 3.6% 1.4% 7.2% 3.8% 6.2% -.7%.3% 4.9% 5.7% -.2% 5.3% 2.7% FY8/19 8.3% 4.7% 3.8% 5.6% 5.6% 5.6% All stores Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Q2 Q4 1H 2H FY FY8/8 55.1% 27.1% 43.5% 58.1% 4.3% 36.7% 4.8% 26.% 23.6% 26.6% 27.3% 26.2% 41.4% 43.5% 28.4% 35.% FY8/9 5.5% 21.2% 41.5% 21.9% 44.% 18.6% 16.% 14.6% 26.8% 21.8% 38.4% 4.2% 22.2% 25.9% 26.5% 26.2% FY8/1 6.4% 67.9% 45.3% 45.7% 46.6% 52.5% 5.7% 69.6% 54.4% 48.% 33.1% 36.7% 57.1% 51.7% 47.6% 49.5% FY8/ % 61.4% 35.3% 4.1% 24.8% 26.% 31.3% 49.7% 39.9% 44.4% 5.8% 52.2% 4.5% 3.2% 4.2% 49.4% 34.7% 44.8% 4.% FY8/ % 42.3% 34.2% 34.3% 42.2% 67.7% 64.8% 46.% 51.% 18.1% 96.2% 75.% 49.9% 46.2% 53.6% 92.% 47.9% 73.4% 61.8% FY8/ % 44.7% 111.4% 113.5% 87.7% 82.2% 7.7% 52.8% 67.8% 32.4% 16.6% 37.1% 81.2% 94.8% 63.3% 29.4% 88.6% 44.% 62.5% FY8/14.4% 15.6% -4.6% -7.2% -2.6% -8.9% 23.2% -12.2% -6.9% -9.7% -6.2% -11.8% 3.1% -6.% 2.% -9.3% -2.% -3.8% -2.9% -9.% -9.6% 2.3% -9.4% -5.% 4.% -17.8% 29.9% 33.9% 17.5% 24.4% 2.3% -5.5% -4.1% 11.% 2.8% -4.7% 15.7% 5.8% 18.3% 25.% 9.4% 21.7% 18.5% 14.% 1.3% 4.7% -3.4% 3.5% 1.2% 4.7% 17.3% 18.2% 3.4% 6.2% 17.8% 4.9% 1.5% 9.3% 14.9% 9.% 1.8% 8.5% 5.8% 5.1% 1.7% 6.1% 8.7% 4.8% 5.7% 11.1% 8.5% 7.2% 6.3% 9.7% 6.7% 8.1% 3.% -.8% 5.2% 1.7% 5.8% 4.3% 13.4% 7.2% 5.7% 1.8% 7.9% 1.7% 2.4% 3.9% 8.7% 9.7% 3.2% 9.2% 6.4% FY8/19 12.% 7.9% 7.8% 9.3% 9.3% 9.3% Store count Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Q2 Q4 1H 2H FY FY8/ Net increase Openings Closures FY8/ Net increase Openings Closures FY8/ Net increase Openings Closures FY8/ Net increase Openings Closures FY8/ Net increase Openings Closures FY8/ Net increase Openings Closures Net increase Openings Closures Net increase Openings Closures Net increase Openings Closures Net increase Openings Closures FY8/ Net increase Openings Closures Source: Shared esearch based on company data 5/63

6 esearch eport by Shared esearch Inc. Quarterly trends and results Quarterly performance FY8/19 YoY change (JPYmn) Q2 Q4 Q2 Q4 Q2 Q4 Cons. Cons. Cons. Est. % of FY FY Est. FY8/19 Sales 9,95 11,577 12,92 12,57 11,135 12,685 13,316 13,315 11,695 13,599 14,558 15,2 46,189 5,451 54,872 54, % 62,8 +4,421 +7,928 Eyewear (Japan) 8,338 9,827 1,196 1,711 9,314 1,646 11,54 11,192 9,495 11,233 11,93 12,436 39,72 42,26 45,67 44, % 48,5 +2,861 +3,433 Eyewear (overseas) ,114 1,18 1,151 1,167 1,462 1,423 1,636 1,637 1,99 1,95 4,136 5,23 7,213 6, % 11,5 +2,1 +4,287 Other ,981 3,42 2,589 2, % 2, YoY 22.2% 2.6% 6.4% 8.5% 11.9% 9.6% 1.1% 5.9% 5.% 7.2% 9.3% 12.8% 13.5% 9.2% 8.8% 7.9% 14.4% Eyewear (Japan) 18.7% 18.4% 3.5% 7.1% 11.7% 8.3% 8.4% 4.5% 1.9% 5.5% 7.7% 11.1% 11.% 8.% 6.8% 5.4% 7.6% Eyewear (overseas) 86.4% 72.1% 43.7% 23.1% 16.5% 26.% 31.2% 28.4% 42.1% 4.3% 36.1% 37.% 5.8% 25.8% 38.6% 34.3% 59.4% Other 6.1% 8.4% 6.4% 9.6% 7.4% 5.8% 2.2% -6.6% -15.8% -16.3% -16.9% -1.% 7.7% 2.% -14.9% -2.5% 8.1% Gross profit 7,486 8,545 9,147 9,35 8,473 9,523 1,146 9,8 8,911 1,24 11,176 11,128 34,528 37,942 41,455 41,58 11.% 47,66 +3,513 +6,25 YoY 2.8% 22.5% 6.% 9.7% 13.2% 11.4% 1.9% 4.8% 5.2% 7.5% 1.2% 13.6% 13.9% 9.9% 9.3% 8.2% 15.% GPM 75.2% 73.8% 75.6% 74.4% 76.1% 75.1% 76.2% 73.6% 76.2% 75.3% 76.8% 74.1% 74.8% 75.2% 75.5% 75.4% 75.9% +.3pp +.3pp SG&A expenses 7,176 7,667 8,162 7,839 7,694 8,282 8,26 8,34 8,363 8,611 9,153 9,257 3,844 32,54 35,384 34, % 4,41 +2,844 +5,26 Salaries and allowances 2,111 2,216 2,268 2,321 2,316 2,391 2,483 2,386 2,44 2,586 2,638 8,916 9, Advertising expenses ,42 1, ent 1,8 1,938 2,75 2,18 1,973 2,132 2,238 2,327 2,74 2,233 2,35 7,831 8, Other 2,729 2,783 3,58 3,17 2,912 3,278 3,39 3,215 3,218 3,451 3,641 11,677 12,444 YoY 2.4% 21.3% 15.5% 6.% 7.2% 8.% 1.2% 5.9% 8.7% 4.% 1.8% 11.5% 15.3% 5.5% 8.7% 7.2% 14.2% Salaries and allowances 23.6% 21.4% 17.7% 11.3% 9.7% 7.9% 9.5% 2.8% 5.4% 8.2% 6.2% % 7.4% - - Advertising expenses 14.3% 49.% 7.1% -4.1% -8.% -34.1% -34.3% -4.3% 28.% -29.1% 4.8% % -23.6% - - ents 21.3% 21.6% 14.5% 1.3% 9.6% 1.% 7.9% 15.3% 5.1% 4.7% 5.% % 1.7% - - Other 18.8% 15.4% 16.8% 7.% 6.7% 17.8% -.6% 3.5% 1.5% 5.3% 19.8% % 6.6% - - SG&A ratio 72.1% 66.2% 67.5% 62.4% 69.1% 65.3% 62.% 62.4% 71.5% 63.3% 62.9% 61.6% 66.8% 64.5% 64.5% 64.1% 64.3% -.pp -.1pp Salaries and allowances 21.2% 19.1% 18.8% 18.5% 2.8% 18.8% 18.6% 17.9% 2.9% 19.% 18.1% % 19.% Advertising expenses 5.4% 6.3% 6.3% 3.1% 4.4% 3.8% 3.8% 2.8% 5.4% 2.5% 3.6% - 5.2% 3.7% ents 18.1% 16.7% 17.2% 16.1% 17.7% 16.8% 16.8% 17.5% 17.7% 16.4% 16.1% - 17.% 17.2% Other 27.4% 24.% 25.3% 24.7% 26.2% 25.8% 22.8% 24.1% 27.5% 25.4% 25.% % 24.7% - - Operating profit , ,24 1,887 1, ,629 2,23 1,871 3,683 5,42 6,71 6, % 7, ,179 Eyewear (Japan) , ,364 1,851 1, ,737 1,992 1,917 3,868 5,698 6,235 6, % 6, Eyewear (overseas) % Other YoY 29.% 34.5% -36.8% 33.3% 152.1% 41.1% 91.6% -.9% -29.7% 31.4% 7.2% 25.1% 2.7% 46.7% 12.4% 14.3% 19.4% Eyewear (Japan) 98.9% 38.4% -34.4% 9.% 98.9% 45.% 92.2% 4.8% -29.5% 27.3% 7.6% 16.4% 2.2% 47.3% 9.4% 6.8% 1.7% Eyewear (overseas) ,65.% % Other % 26.1% % 24.3% -44.8% % -67.% OPM 3.1% 7.6% 8.1% 12.% 7.% 9.8% 14.2% 11.2% 4.7% 12.% 13.9% 12.5% 8.% 1.7% 11.1% 11.3% 11.5% +.4pp +.5pp Eyewear (Japan) 4.7% 9.6% 9.4% 14.7% 9.% 12.8% 16.7% 14.7% 6.2% 15.5% 16.7% 15.4% 8.4% 11.3% 11.4% 11.2% 11.% +.1pp -.4pp Eyewear (overseas) % - 3.2% - 3.5%.8% % 2.5% 3.9% +2.9pp Other 2.2% 4.5% 7.4% -.3% 5.3% 4.% %.1% ecurring profit , ,189 1,857 1, ,495 1,939 1,767 3,64 5,227 5,627 5, % 6, ,213 YoY 42.2% 31.9% -37.% 36.3% 155.6% 38.7% 92.4% -1.9% -39.4% 25.7% 4.4% 19.6% 3.5% 45.% 7.7% 9.5% 21.6% PM 2.8% 7.4% 8.% 12.% 6.3% 9.4% 13.9% 11.1% 3.6% 11.% 13.3% 11.8% 7.8% 1.4% 1.3% 1.5% 1.9% -.1pp +.6pp Net income , , ,98 2,767 3,97 3, % 3, YoY -46.3% 44.5% -26.2% 3.6% 1,338.5% 2.6% 82.% -22.3% -55.6% 66.9% -.2% 28.7% 4.1% 39.7% 11.9% 2.5% 25.9% Net margin.3% 3.7% 5.5% 6.9% 3.4% 4.1% 9.% 5.% 1.4% 6.4% 8.2% 5.7% 4.3% 5.5% 5.6% 6.1% 6.2% +.2pp +.6pp Eyewear sales per store in Japan (S est.) YoY 11.5% 11.1% -3.3%.4% 4.3% 1.6% 2.8% -.5% -3.7% -.8%.8% 3.2% 4.2% 1.9%.% Eyewear specialty store sales YoY Comparable stores (Japan) 11.6% 12.% -2.1% 1.% 4.9% 3.6% 3.1% 1.9% -.7%.3% 4.9% 5.7% 4.9% 3.3% 2.7% - 6.4% All stores (Japan) 17.3% 18.2% 3.4% 6.2% 11.1% 8.5% 7.2% 6.3% 2.4% 3.9% 8.7% 9.7% 1.5% 8.1% 6.4% - 2.7% Comparable stores (China) 4.2% 8.4% - 1.5% 1.9% 7.9% - Store count (Japan) Openings % 3 +7 Closures % - +3 Store count (China) Openings % 3 +6 Closures % - - Store count (US) Openings Closures Inventories 5,175 5,598 5,363 4,354 4,629 4,597 4,839 4,56 5,65 5,666 5,56 5,1 4,354 4,56 5, Merchandise inventories 4,919 5,349 5,165 4,221 4,458 4,411 4,65 4,31 5,289 5,376 5,264 4,756 4,221 4,31 4, Days in inventory Days in inventory: merchandise CNY/JPY USD/JPY YoY (CNY/JPY) 14.8% 1.8% -7.8% -15.6% -2.6% -15.4% -5.9% -1.9% 1.7% 7.3% 2.9% 5.6% -2.2% -11.4% 5.9% - YoY (USD/JPY) 17.8% 6.2% -3.2% -1.9% -16.3% -9.9% -1.5% 2.7% 9.6% 1.1% -5.1% -.2% 2.% -6.6% 1.1% - Source: Shared esearch based on company data Note: China subsidiaries were newly consolidated from, US subsidiaries were newly consolidated from Q4, and Taiwan subsidiaries were newly consolidated from FY8/19. 6/63

7 esearch eport by Shared esearch Inc. 1H and full-year earnings forecasts FY8/19 Init. Est. FY8/19 (JPYmn) 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H Cons. Cons. Cons. Cons. Est. Diff. Init. Est. FY Est. Change Sales 17,745 22,954 21,527 24,662 23,82 26,631 25,294 29,578 29,3 33,5 4,699 46,189 5,451 54,872 54, ,36 62,8 +7,928 Eyewear (Japan) 15,329 19,857 18,165 2,97 19,96 22,246 2,728 24,339 35,186 39,72 42,26 45,67 44, ,26 48,5 +3,433 Stores (JINS) 14,761 19,15 17,396 19,947 19,89 21,297 19,71 23,218 33,776 37,343 4,386 42,919 42, ,237 46,524 +3,65 E-commerce, other ,26 1,121 1,45 1,727 1,819 2,147 2, ,23 1, E-commerce ,79 1,187 1,484 1, ,3 1, Other Eyewear (overseas) 1,68 1,675 1,914 2,222 2,318 2,885 3,273 3,94 2,743 4,136 5,23 7,213 6, ,76 11,5 +4,287 Accessories 1,347 1,421 1,447 1,534 1,542 1,5 1,293 1,296 2,768 2,981 3,42 2,589 2, ,34 2, Women's ,685 1,84-1,898-2, Men's ,295 1,236-1,66-1, YoY.6% 24.% 21.3% 7.4% 1.7% 8.% 6.2% 11.1% 15.8% 13.3% 12.6% 13.5% 9.2% 8.8% 7.9% +.8pp 9.7% 14.4% +5.7pp Eyewear (Japan) % 5.3% 9.9% 6.4% 3.8% 9.4% % 8.% 6.8% 5.4% +.pp 7.2% 7.6% +.pp Stores (JINS) % 4.9% 9.7% 6.8% 3.2% 9.% % 8.1% 6.3% 5.% +.pp 7.1% 8.4% +.pp E-commerce, other % 14.3% 13.1% -.9% 17.9% 18.1% % 5.3% 18.% 14.3% +.pp 11.2% -8.% -.3pp Eyewear (overseas) % 32.7% 21.1% 29.8% 41.2% 36.6% % 25.8% 38.6% 34.3% +.pp 29.9% 59.4% +.2pp Accessories % 8.% 6.6% -2.2% -16.1% -13.6% % 2.% -14.9% -2.5% -.1pp 9.8% 8.1% +.2pp CoGS 4,572 5,82 5,496 6,165 5,824 6,685 6,143 7,273 7,7 8,7 1,375 11,661 12,58 13,416 13, ,59 15,14 +1,724 Gross profit 13,173 17,151 16,31 18,497 17,996 19,946 19,151 22,34 22,23 25,43 3,324 34,528 37,942 41,455 41, ,851 47,66 +6,25 GPM 74.2% 74.7% 74.5% 75.% 75.5% 74.9% 75.7% 75.4% 75.9% 75.9% 74.5% 74.8% 75.2% 75.5% 75.4% +.1pp 75.6% 75.9% +.3pp Eyewear 76.2% 76.4% 76.1% 76.5% 77.1% 73.5% % 76.3% 75.2% 75.5% 75.4% +.1pp 75.6% 75.9% +.4pp Eyewear (Japan) 75.7% 76.1% 77.1% 75.8% 76.6% 76.% % 76.4% 76.3% 76.3% 76.7% 76.6% +.3pp Eyewear (overseas) 76.8% 83.5% 76.8% 56.4% 8.4% 8.2% % 78.7% 8.3% 8.1% +.2pp 79.9% 78.7% -1.6pp Accessories 5.8% 48.7% 52.2% 52.2% 53.7% 51.9% 48.8% 49.4% % 52.2% 52.8% 49.1% 5.3% -1.2pp 51.6% 51.8% +2.7pp SG&A expenses 12,28 14,46 14,843 16,1 15,976 16,564 16,974 18,41 19,75 2,66 26,74 3,844 32,54 35,384 34, ,251 4,41 +5,26 SG&A ratio 69.2% 63.% 69.% 64.9% 67.1% 62.2% 67.1% 62.2% 67.4% 61.7% 65.7% 66.8% 64.5% 64.5% 64.1% +.4pp 63.7% 64.3% -.1pp Operating profit 893 2,691 1,188 2,495 2,19 3,383 2,177 3,894 2,48 4,77 3,585 3,683 5,42 6,71 6, ,6 7,25 +1,179 Eyewear (Japan) 877 2,98 1,334 2,534 2,2 3,498 2,326 3,99 3,785 3,868 5,698 6,235 6, ,4 6, Eyewear (overseas) Accessories YoY -8.1% 34.5% 33.% -7.3% 69.9% 35.6% 7.8% 15.1% 13.9% 22.5% 2.6% 2.7% 46.7% 12.4% 14.3% 22.2% 19.4% Eyewear (Japan) 52.1% -12.9% 64.9% 38.% 5.7% 11.7% % 47.3% 9.4% 6.8% 12.3% 1.7% Eyewear (overseas) % Others 82.1% 168.8% -7.8% % -67.% % - OPM 5.% 11.7% 5.5% 1.1% 8.5% 12.7% 8.6% 13.2% 8.5% 14.2% 8.8% 8.% 1.7% 11.1% 11.3% -.3pp 11.9% 11.5% +.5pp Eyewear (Japan) 5.7% 14.6% 7.3% 12.1% 11.% 15.7% 11.2% 16.1% % 9.9% 13.5% 13.8% 13.7% +.2pp 14.1% 14.2% +.4pp Eyewear (overseas) -1.2% -13.9% -1.8% -3.2% -9.8% -3.4% -.5% 2.2% % -6.7% -6.3% 1.% 2.5% -1.5pp 1.5% 3.9% +2.9pp Accessories 2.1% 1.1% 3.5% 2.8% 3.% -1.1% -1.3% -7.9% % 3.2% 1.% -9.1% -2.8% -6.3pp 3.% -3.6% +5.5pp ecurring profit 843 2,638 1,132 2,472 1,892 3,335 1,921 3,76 2,3 4,54 3,481 3,64 5,227 5,627 5, ,2 6,84 +1,213 YoY -8.5% 31.4% 34.3% -6.3% 67.1% 34.9% -42.4% 11.1% -37.9% 22.5% 18.8% 3.5% 45.% 7.7% 9.5% 18.6% 21.6% PM 4.8% 11.5% 5.3% 1.% 7.9% 12.5% 7.6% 12.5% 7.8% 13.6% 8.6% 7.8% 1.4% 1.3% 1.5% -.3pp 11.2% 1.9% +.6pp Extraordinary gains (losses) Pre-tax profit 752 2,546 1,21 2,31 1,545 2,92 1,748 3,161 2,25 3,79 3,298 3,331 4,465 4,99 5, ,7 6,4 +1,131 Tax charges , , ,45 1,396 1,35 1,697 1,812 1, ,9 2, Implied tax rate 53.9% 38.9% 55.1% 34.1% 42.1% 35.8% 4.8% 34.7% 3.7% 38.3% 42.3% 4.5% 38.% 36.9% 35.2% +.pp 33.3% 35.4% -.pp Net income 347 1, , ,873 1,34 2,63 1,56 2,34 1,92 1,98 2,767 3,97 3, ,8 3,9 +83 YoY -1.2% 81.1% 31.8% -2.1% 95.6% 23.% 15.7% 1.1% 5.9% 13.4% 52.8% 4.1% 39.7% 11.9% 2.5% -8.6pp 37.3% 25.9% +14.pp SG&A expenses 12,28 14,46 14,843 16,1 15,976 16,564 16,974 18,41 19,75 2,66 26,74 3,844 32,54 35,384 34, ,251 4,41 +5,26 Personnel expenses 4,99 4,724 5,3 5,365 5,718 5,657 5,866 6,22 6,91 7,178 8,823 1,368 11,375 12,86 12, ,232 14,88 +2,2 Advertising expenses ,142 1, ,392 1,172 1,83 2,24 1,688 1,898 1, ,18 2, ents (excl. company houses) 2,931 3,639 3,565 3,883 3,911 4,334 4,37 4,734 4,922 5,433 6,57 7,448 8,245 9,41 8, ,862 1,355 +1,314 Depreciation (incl. asset retirement) ,4 1,27 1,14 1,195 1,169 1,38 1,267 1,379 1,915 2,247 2,299 2,477 2, ,262 2, Lease payments Commission fee 1,21 1,485 1,538 1,668 1,585 1,58 1,68 1,957 2,23 2,55 2,686 3,26 3,165 3,637 3, ,79 4, Supplies expenses ,37 1,381 1,423 1,596 1, ,64 1, Other 1,364 1,565 1,536 1,684 1,692 1,878 1,834 2,11 2,91 2,329 2,929 3,22 3,57 3,935 3, ,89 4, YoY 4.8% 25.7% 2.9% 1.7% 7.6% 3.5% 6.2% 11.1% 16.4% 12.2% 15.2% 15.3% 5.5% 8.7% 7.2% 8.3% 14.2% Personnel expenses 15.2% 32.5% 22.1% 13.6% 14.3% 5.4% 2.6% 1.% 17.8% 15.4% 23.8% 17.5% 9.7% 6.3% 7.% 7.5% 16.6% Advertising expenses -53.5% -13.2% 35.1% 7.8% -21.4% -25.6% 8.2% 17.2% 43.2% 26.6% -38.% 2.4% -23.4% 12.4% 13.9% 24.9% 35.1% ents (excl. company houses) 25.3% 38.7% 21.6% 6.7% 9.7% 11.6% 1.1% 9.2% 14.3% 14.8% 32.4% 13.4% 1.7% 9.7% 7.3% 7.5% 14.5% Depreciation (incl. asset retirement) 26.8% 17.8% 12.8% 21.6% 6.2% -1.% 5.9% 9.5% 8.4% 5.4% 22.% 17.3% 2.3% 7.7% 1.% -1.6% 6.8% Lease payments 25.4% 13.3% 13.2% 13.7% 7.6% -6.% -9.1% -6.1% -16.3% -24.8% 18.8% 13.5%.5% -7.7% -12.5% -14.3% -2.5% Commission fee 5.3% 25.3% 28.1% 12.3% 3.1% -5.3% 6.% 23.9% 2.4% 5.% 15.5% 19.4% -1.3% 14.9% 12.7% 17.2% 12.1% Supplies expenses 4.6% 17.7% 9.5% 2.5% 3.4% 2.7% 17.2% 7.7% 7.2% 4.5% 11.4% 5.7% 3.% 12.2% 13.6% 12.7% 5.8% Other 4.4% 26.8% 12.6% 7.6% 1.2% 11.5% 8.4% 11.9% 14.% 1.9% 15.3% 9.9% 1.9% 1.2% 5.% 6.7% 12.3% SG&A ratio 69.2% 63.% 69.% 64.9% 67.1% 62.2% 67.1% 62.2% 67.4% 61.7% 65.7% 66.8% 64.5% 64.5% 64.1% +.4pp 63.7% 64.3% -.1pp Personnel expenses 23.1% 2.6% 23.2% 21.8% 24.% 21.2% 23.2% 21.% 23.6% 21.4% 21.7% 22.4% 22.5% 22.% 22.4% -.3pp 22.1% 22.4% +.4pp Advertising expenses 4.8% 4.3% 5.3% 4.3% 3.8% 3.% 3.8% 3.1% 4.8% 3.5% 4.5% 4.8% 3.3% 3.5% 3.5% -.1pp 3.8% 4.1% +.6pp ents (excl. company houses) 16.5% 15.9% 16.6% 15.7% 16.4% 16.3% 17.% 16.% 16.8% 16.2% 16.1% 16.1% 16.3% 16.5% 16.3% +.2pp 16.% 16.5% +.pp Depreciation (incl. asset retirement) 5.2% 4.3% 4.8% 4.9% 4.6% 4.5% 4.6% 4.4% 4.3% 4.1% 4.7% 4.9% 4.6% 4.5% 4.3% +.2pp 4.1% 4.2% -.3pp Lease payments 1.8% 1.5% 1.7% 1.6% 1.7% 1.4% 1.4% 1.2% 1.%.8% 1.7% 1.7% 1.5% 1.3% 1.2% +.1pp 1.2%.9% -.4pp Commission fee 6.8% 6.5% 7.1% 6.8% 6.7% 5.9% 6.6% 6.6% 6.9% 6.1% 6.6% 6.9% 6.3% 6.6% 6.6% +.1pp 6.7% 6.5% -.1pp Supplies expenses 3.3% 3.1% 3.% 3.% 2.8% 2.8% 3.1% 2.8% 2.9% 2.5% 3.2% 3.% 2.8% 2.9% 3.% -.1pp 2.9% 2.7% -.2pp Other 7.7% 6.8% 7.1% 6.8% 7.1% 7.1% 7.3% 7.1% 7.1% 7.% 7.2% 7.% 7.1% 7.2% 6.9% +.3pp 6.9% 7.% -.1pp Domestic eyewear sales growth Comparable stores -16.8% 7.9% 11.8% -.4% 4.2% 2.5% -.2% 5.3% 5.6% 1.3% -4.1% 4.9% 3.3% 2.7% 6.4% -3.7pp 2.3% 3.3% +.6pp All stores -4.7% 15.7% 17.8% 4.9% 9.7% 6.7% 3.2% 9.2% 1.9% 6.6% 5.8% 1.5% 8.1% 6.4% 2.7% +3.7pp 7.1% 8.6% +2.2pp Store count (Japan) Openings Closures Store count (overseas) China Taiwan Hong Kong US Domestic eyewear sales volume Eyewear (excl. JINS SCEEN) JINS SCEEN Capex (incl. lease guarantee deposits) 985 2,668 1,591 1,57 1,562 1,952 1,877 1,853 3,653 3,161 3,514 3,73 3, ,59 4, New store openings ,12 1,155 1,2 1,28 1, , ,251 enovation , ,91 1, Other 113 1, , ,91 1, , Overseas ,21 1, New store openings (Japan) enovated stores Source: Shared esearch based on company data 7/63

8 esearch eport by Shared esearch Inc. Full-year results (out October 12, 218) Full-year : Sales rose 8.8% and operating profit grew 12.4%. Domestic comparable store sales recovered in 2H and profitability improved overseas to achieve a full-year profit for the first time. There is urgent need for reorganization of the accessories business Vs. forecasts: Sales in line with forecasts. Operating profit missed forecasts due to results being far below forecasts overseas and accessories booking a loss Domestic: Comparable store sales recovered in 2H due to various initiatives. Average price per pair of glasses recovered with the new three price points system Comparable stores: Sales rose 2.7% against the initial forecast of 2.3%. Sales were down.2% in 1H, but recovered in 2H, when they were up 5.3% (customer count was up 2.8% and customer spend 2.4%) Average price per pair of glasses: ecovered in 2H for functional and prescription eyewear on the success of initiatives, including limits on discounting, implemented after weak performance in 1H China: Amid worsening competitive condition, strengthened differentiation from imitation stores run by competitors. Increased profits on improved GPM and recovery of existing stores. Continued to achieve profitability US: Comparable store sales grew significantly due to measures such as improving merchandising and store operations. GPM also rose due to a change in the procurement source for lenses. Profit structure improved Accessories: Operating profit declined more than expected on a slump in women s products. JINS has already begun closing unprofitable stores and reviewing its store operations and product strategy Eyewear store openings: Opened 61 stores (3 in Japan, 3 in China, and none in the US), nine of which were suburban roadside stores. Aiming to differentiate with a format combining cafés and stores Topics: Entered fifth overseas business area (Hong Kong) in September. Effective July 1, 219, company name will become JINS Holdings Inc. as the company transfers to a holding company structure FY8/19: Forecasts operating profit of JPY1.2bn (+19% YoY). Plans consolidation of Taiwan operations. Expects domestic recovery and higher profit overseas, and will watch trends in accessories. Targets growth using three pillars: Products (Violet Plus), Experience (next-generation stores), and Data (enhanced database) 8/63

9 esearch eport by Shared esearch Inc. Comparable store sales YoY 7% 6% 5% 4% 3% 2% 1% % -1% -2% Earnings 13.7% 11.6% 23.2% -3% FY8/ % 45.6% FY8/ % 32.9% 5.1% -17.6% -17.7% -18.5% -15.4% -24.5% -24.6% FY8/14 3.2% Initial Est. FY: up 7.8% 1H: up 14.4% 2H: up 2.7% 12.9% 11.6%12.% -2.1% 1.% 4.9% 3.6% 3.1% 1.9% -.7%.3% 4.9% 5.7% Initial Est. FY: up 2.% 1H: up 2.3% 2H: up 1.8% Initial Est. FY: up 2.3% 1H: up 3.% 2H: up 1.7% Initial Est. FY: up 3.3% 1H: up 5.6% 2H: up 1.3% FY8/19 16, 14, 12, Source: Shared esearch based on company data Overview 26.2% 1, 16.2% 17.7% 8, 13.9% 11.7% 12.2% 13.7% 14.2% 13.9% 12.5% 12.% 11.2% 12.% 12.5% 6, 9.9% 8.9% 9.8% 7.6% 6.8% 7.6% 8.1% 9.8% 7.% 4, 4.7% 853 1,43 2,5871,761,183 1, % ,26 2.9% , % 1, , ,241,887 1,496 1,629 2, 2,231, % (JPYmn) FY8/12 FY8/13 FY8/14 FY8/19 Sales: JPY54.9bn (+8.8% YoY) Operating profit: JPY6.1bn (+12.4% YoY) Sales Operating profit OPM (right axis) 32% 28% 24% 2% 16% 12% 8% 4% % Domestic comparable stores experienced a slump in 1H, but recovered in 2H, and JINS improved the profitability of the overseas business, moving it into the black, but the accessories business continued to perform worse than expected. Sales were in line with the company s forecasts, and operating profit was up YoY, but did not achieve the company s target. Operating profit rose JPY669mn YoY, with the domestic eyewear business up JPY537mn, overseas eyewear business up JPY397mn, and accessories down JPY266mn. In, operating profit dropped JPY231mn (-29.7%). However, operating profit started to increase from Q2, up JPY389mn in Q2 (+31.4%), up JPY136mn in (+7.2%), and up JPY481mn in Q4, leading to an overall operating profit for the full-year. Operating profit missed forecasts by JPY16mn. While domestic eyewear exceeded forecasts by JPY149mn on higher sales, this could not absorb accessories (-JPY152mn) women s accessories in particular and overseas eyewear (-JPY14mn) missing forecasts. Performance by segment Domestic eyewear: In the domestic business, operating profit rose JPY537mn YoY. In 1H, while each collaboration product performed well, domestic comparable store sales were down.2% (versus +3.% in 1H forecast) due to unseasonable weather in October, an increase in the ratio of discount products sold, sales concentrating on lower price products, and weak sales of the new fall and winter series JINSxTIME. Although the company managed to increase sales in volume terms with the help of special sales events that offered discounts for purchasing a number of goods as a package, these sales tactics brought down average customer spend by JPY5 YoY, to JPY7,2. JINS believed disparity between product merchandising and customer needs led to the weak sales of the new series and a higher percentage of discount items. By price point, enhancement of the JPY5, product lineup appears to be helping to capture customers, but the company appears to have had trouble convincing customers of the appeal of the JPY8, and JPY12, lineups, which has led to increased inventory and more discount items. The company hammered out a number of measures aimed at addressing these problems starting in the latter half of 1H. 9/63

10 esearch eport by Shared esearch Inc. In 2H, domestic comparable store sales rose 5.3% (vs. 2H forecast of +1.7%) due to strong performance by JINS SWITCH and rebound in average price per pair of eyeglasses with the effect of the new three price point strategy. As of, a rise in the average price per pair of glasses for functional eyewear from JPY3,4 in to JPY4, in contributed to the increase in sales. The JPY3, lineup of JINS SCEEN products has nearly sold out and, as expected, customers have begun buying eyewear developed in collaboration with Jasper Morrison as the first installment of the JINS Design Project World Designer Series launched in October 217. Initiatives to enhance the JPY8, lineup after a downward forecast revision for prescription eyewear conducted at the time 1H results were released seem to have begun bearing fruit. Issues with the JPY12, lineup remain, but the second installment of the World Designer Series, released in June, has been performing well. The JINS original app has also been well received as the number of downloads surpassed 1,8, by the end of August 218 (1,2, at end May 218). Around 5% of these downloads have led to sales (if 9, customers made a purchase with an average price per pair of eyeglasses of about JPY7,, this would represent sales of JPY63mn or about 1.4% of total sales in the domestic eyewear business). Overseas eyewear: Operating profit rose JPY397mn YoY (July to June, cumulative), achieving a profit for the full year. By region, in China existing stores saw recovery as GPM maintained high levels and improved profitability, and in the US, there was significant sales growth at existing stores due to improvements to store operations and the launching of products designed for the US market, and improved margins (lower lens procurement costs). Accessories: Considering its growing importance, JINS made the accessories business a separate segment in (it had previously been included with other businesses). However, the segment booked an operating loss of JPY225mn against an initial full-year operating profit target of JPY1mn and a revised operating loss target of JPY83mn, so the segment is hindering overall performance. The main reason is a failure in the merchandising of women s products. There were also changes in the market, such as the emergence of online stores and second-hand marketplaces. The company has focused on reviewing its store operations and product strategy. Market conditions remain difficult as competition in accessories sales in the apparel market intensifies. It is promoting product design that returns to the basics, making use of the same outside designers who were in charge of the project to enhance the product appeal of its eyewear. The company began getting new products into stores from August, which seems to have had a positive if minor impact. Performance supplement Market analysis The environment for domestic eyewear retail market had been trending unfavorably, showing consecutive annual decline since March 216. However, the market has begun to recover and the company currently sees signs of improvement. In light of this environment, management has continued to tackle certain issues: revamping the product strategy, improving store operations, and opening more suburban roadside stores as the company continues to strengthen its suburban presence. The following is an overview of comparable store sales by quarter. comparable store sales fell.7% YoY. The company introduced a three price points system in March 217. However, positive effects from the new system were limited and product development accompanying the transition insufficient Q2 comparable stores sales rose slightly at.3%. This figure was strongly impacted by a 2.6% drop in December, although sales recovered in January (+1.7%) and February (+2.2%) comparable store sales saw this trend continue as sales rose 4.9%. Comparable store sales were up 1.1% in March, recording the first double digit increase since January 216. Comparable store sales then rose 3.6% in April and 1.4% in May as products to combat hay fever and JINS SWITCH, glasses which can easily become sunglasses, drove results Q4 comparable store sales increased 5.7%. In June the glasses which were developed in collaboration with Konstantin Grcic as the second installment of JINS Design Project received positive reviews and maintained sales growth (+7.2%). Sales grew 3.8% in July and 6.2% in August due to a successful summer sale and the popularity of the Airframe products 1/63

11 esearch eport by Shared esearch Inc. The company is targeting further growth, and is undertaking critical initiatives to enhance its product lineup and customer service and to strengthen store management. With respect to suburban roadside stores, the company bolstered its in-house team for store development in preparation for an accelerated store opening program and opened nine roadside stores during. The company plans on further openings in FY8/19 and believes the effects of these measures will materialize in the future. Store openings: Opened 61 eyewear stores (3 in Japan, 31 in China, and none in the US) As of the end of, the company had 349 domestic stores in operation (3 store openings; 4 store closings) and 134 overseas stores (13 stores in China, 4 in the US; 31 total store openings: 31 in China, in the US; 4 closings in China). Store openings progressed roughly in line with the full-year plan (3 domestic, 32 in China). The company initially planned to have 29 roadside stores in Japan by end-, but finished with just 25 (shortfall of four, as three planned openings were postponed and one canceled). Existing roadside stores are steadily increasing sales to the senior demographic with the ratio of roadside store sales to seniors up 3 4pp. The ratio of sales to seniors is increasing steadily at roadside stores and overall. Judging from the results of the roadside stores opened so far, the company believes this looks like a winning store strategy and, taking into further consideration the contribution these stores will make to raise the JINS brand awareness going forward, appears to be planning to pursue a market dominance strategy (to some extent) by opening new roadside stores. In the Maebashi area, for example, JINS has positioned itself to serve a market of some 34, people with an estimated eyewear market value of some JPY1.2bn to JPY1.3bn and, with a total of three stores (one in a shopping center and two roadside stores), is aiming to capture 35% of the local market. In regional markets, JINS appears likely to focus most of its new store openings in and around prefectural capitals starting in Gunma and Tochigi. It has already opened three stores in shopping centers and one roadside store in Utsunomiya, which has a larger market than Maebashi. Number of eyewear stores (upper table: domestic; lower table: China) Openings Closures Store count in Japan (right axis) FY8/7 FY8/8 FY8/9 FY8/1 FY8/11 FY8/12 FY8/13 FY8/ Store count in China Source: Shared esearch based on company data QoQ increase FY8/11 FY8/12 FY8/ FY8/ Gross profit For, the company reported a GPM of 75.5%, up.3pp YoY. This improvement was caused in part by lower lens procurement costs in the overseas business, but also because the ratio of sales in the overseas business increased where GPM is comparatively high. The GPM for the domestic business was roughly even YoY as the company limited sales and managed CoGS despite the fall in average price per pair of sunglasses after the shift to the three price points system in March 217. Overseas, GPM improved significantly due to a review of suppliers. 11/63

12 esearch eport by Shared esearch Inc. However, the company intends to return the higher profits gained by lower CoGS into initiatives to increase product value. We will keep a close eye on how higher product value would lead to higher customer count and higher gross profit. In inventories, the company planned to keep a tight control on the supply side while at the same time making some serious structural changes in a) lead times and the way inventories are held; b) the way inventories are held at the store and warehouse levels; and c) full-price sales. The company said it would clarify its thinking on inventories to some extent during the course of 2H and would be ready to start taking definitive steps at the operating level in FY8/19. Gross profit margin (JPYmn) % 7.1% 73.5% 67.9% 76.5% 77.2% 75.6% 75.8% 75.8% 75.6% 76.1% 75.9% 75.2% 75.6% 76.1% 76.2% 76.2% 76.8% 74.2% 73.4% 73.8% 72.8% 73.3% 73.9% 73.6% 73.8% 74.4% 75.1% 75.3% 73.6% 74.1% 72.4%71.5% 72.7% 71.6% 71.9% FY8/1 FY8/11 FY8/ FY8/13 FY8/14 Sales Gross profit GPM (right axis) % 74% 7% 66% 62% 58% 54% 5% +5pp +4pp +3pp +2pp +1pp pp -1pp -2pp -3pp -4pp -5pp -6pp FY8/13 FY8/14 GPM YoY change GPM (right axis) 78% -15pp SG&A ratio YoY change SG&A ratio (right axis) 45% 77% 76% 75% 74% 73% 72% 71% -1pp -5pp pp +5pp +1pp +15pp FY8/13 FY8/14 5% 55% 6% 65% 7% 75% Inventory, sales, and inventory days 14, 12, 1, 8, 6, 4, 2, (JPYmn) FY8/1 Inventory Sales Inventory days (right axis) Merchandise inventory days (right axis) FY8/ ,11 1,32 Source: Shared esearch based on company data 1,57 FY8/12 2,152 2,237 2,443 2,917 FY8/13 3,266 4,27 4,621 4,559 FY8/14 4,289 2,985 3,362 3,268 3,792 3,931 5,175 5,598 5,363 4,354 4,629 4,597 4,839 4,56 5,65 5,666 5,56 5, SG&A expenses SG&A expenses increased by 8.7%, and the SG&A-to-sales ratio was 64.5%. While sales were solid, the SG&A-to-sales ratio was nearly unchanged YoY due to higher advertising expenses and inflation in transportation expenses. Comparable store sales in 1H fell by.2% YoY, causing the SG&A-to-sales ratio to deteriorate to 67.4%, but recovered in 2H (+5.3% YoY), helping the ratio to recover to 61.7%. 12/63

13 esearch eport by Shared esearch Inc. SG&A expenses breakdown Salaries and allowances 1, ents Salaries and allowances, % of sales (right axis) 8, ents, % of sales (right axis) Advertising expenses Other expenses Advertising, % of sales (right axis) Other expenses, % of sales (right axis) 5% 4% 6, 3% 4, 2% 2, 1% (JPYmn) FY8/1 FY8/11 FY8/12 FY8/13 FY8/14 - Domestic eyewear business 14, 12, Sales Operating profit OPM (right axis) 14.9% 14.4% 1, 9,855 1,2 8, 8,32 8,338 6, 7,27 8.2% 4, 4.7% 2.8% 2, 1,467 1, Q2 Q4 (JPYmn) Source: Shared esearch based on company data 9,827 1, % 9.4% % 1,711 1,571 9,314 9.% 836 NA Q2 Q4 12.8% 1,646 1, % 14.7% 11,54 11,192 1,851 1,647 9, % 589 Q2 Q4 15.5% 11, % 11, % 12,436 1,737 1,992 1,917 Q2 Q4 18% 16% 14% 12% 1% 8% 6% 4% 2% % Overseas business (results for July 216 June 217 included in consolidated results for ) For its overseas business, the company reported JPY7.2bn in sales (+38.6% YoY) and JPY7mn in operating profit (JPY327mn operating loss in ) for. For China, it reported JPY6.4bn in sales and JPY45mn in operating profit, and for the US it reported JPY772mn in sales and an operating loss of JPY334mn. The profits in China continue to effectively cover the operating losses in the US. Despite a harsh competitive environment in China, the company is finding means to distinguish its stores from imitation stores run by competitors. Comparable store sales recovered and GPM improved. In the US, sales at existing stores rose significantly due to improvements to store operations and launching products designed for US customers. The company also raised GPM by changing the procurement source of lenses in the country. As a result, the overall overseas business achieved an operating profit. A narrowing of the operating loss in the US appears to have contributed significantly. US comparable store sales increased by 32% in on product-related measures, and the growth rate stayed above 3% even in August and September. At the end of August 218, JINS opened its fifth store, located in a West Coast shopping center (Del Amo Fashion Center, LA). An operating loss occurred when it proved impossible to absorb head office expenses, but the company says there was an operating profit at the store level. In April, the company opened its first franchise store in the Philippines, making it its fourth country of operation. In September 218, the company opened its first store in Hong Kong, which became its fifth country of operation. Overseas eyewear business 2,5 2, 1,5 7.9% Sales Operating profit OPM (right axis) , Q2 Q4 (JPYmn) Source: Shared esearch based on company data 1,114 1,18 1,151 1,167 NA Q2 Q ,462 1, ,636 1, Q2 Q4-68 1,99 1, Q2 Q4 12% 1% 8% 6% 4% 2% % -2% Toward FY8/19 In FY8/19, the company forecasts sales of JPY62.8bn (+14.4% YoY) and operating profit of JPY7.3bn (+19.4% YoY). The company will strive to improve product appeal and customer service, develop innovative products, implement services which respond to various demands, and further boost customer value as its top priority. 13/63

14 esearch eport by Shared esearch Inc. In the domestic business, as in, the company will continue to accelerate openings of suburban roadside stores. It plans to conduct initiatives to secure the large market of senior customers as well as promote the creation of an innovative customer experience in which customers can easily purchase products either online or in-store through the JINS original app. In the overseas business, the company plans to open new stores as appropriate and boost comparable store sales in China and launch products designed for the US market in the US as it aims to improve profitability by building a business model suited to the region. From FY8/19, Taiwan will be newly included in consolidated results. Toward Q4 and FY8/19 (for reference, as of ) As of July 218, JINS believes progress is largely in line with its full-year forecasts (as revised on April 5, 218). Although domestic eyewear looks set to exceed the profit forecast, conditions remain somewhat unpredictable due to asset retirement obligations in China and a sales slowdown in the overseas eyewear business, along with the likelihood that the accessories business has yet to bottom out. Domestic eyewear JINS expects a rebound in the average selling price per pair of glasses as product appeal recovers. Measures expected to lead to a rebound include 1) an expansion of the product lineup at JPY8,, which began in the latter half of Q2; 2) more one-time product offerings; 3) strong sales of SWITCH glasses; and 4) the elimination of the drag from the company's move to the three price system in March 217. YoY comparisons for average customer spend in 2H will also be aided by a lower hurdle, as the average customer spend will come down from JPY7,7 in 1H (JPY7,3 in 1H ) to JPY7,2 in 2H. With respect to an expansion of the product lineup at JPY8,, JINS noted that most of the weakness in sales was seen in the JINSxTIME product lineup, most of which is priced at JPY12,. As a result, products at JPY5, accounted for a larger proportion of overall sales. In response to the shortfall in JINSxTIME sales, the company also began expanding its product offering at JPY8, in March 218. The product lineup at JPY8, had previously accounted for 36% of sales but in March 218 it accounted for more than 4% of sales while the proportion of sales accounted for by products at JPY5, declined by 4pp, boosting the average customer spend in March to JPY7,3. In prescription eyewear as well, the average price per pair of glasses has increased from JPY8,25 in 1H to JPY8,6 in 2H. Specifically, in regard to measure 2), JINS on June 14 launched glasses developed in collaboration with Konstantin Grcic as the second installment of the JINS Design Project World Designer Series. June and July sales were favorable, even for glasses in the JPY12, lineup. The company plans to continue launching products in the Designer Series about once every six months. In regard to measure 3), sales of SWITCH glasses remain robust, and JINS aims to increase customer count by raising awareness of its detachable sunglasses. A measure to gain new customers by enhancing the JPY5, lineup is steadily bearing fruit, and the company plans next to focus on creating an environment that encourages more customers to purchase from the JPY12, lineup. In regard to measure 4), for both functional and prescription eyewear, the drag seems to have run its course, since the average price per pair of glasses has increased. In functional eyewear, the average price per pair of glasses rose from JPY3,4 in to JPY4, in, contributing to the overall increase. The JPY3, lineup of JINS SCEEN products has nearly sold out, and customers have been moving to the enhanced JPY5, lineup as expected. In addition, in prescription eyewear, the average price per pair of glasses has increased from JPY8,25 in 1H to JPY8,6 in 2H on the strength of measures 1) and 4) together. JINS plans to keep aiming for higher comparable store sales in FY8/19. It will prioritize increasing the customer count, winning new customers by product appeal enhancement and advertising spending. It also expects organic growth in customer spend as the average price per pair of glasses increases for functional eyewear, the ratio of customers in the senior demographic steadily increases with the help of roadside stores, and options such as bifocal lenses and a lineup of higher price products are added. Furthermore, from January 218 JINS began selling its own contact lenses through its online store. It is working to develop qualified staff, and is looking forward to a synergistic effect from incrementally increasing the number of brick-and-mortar stores that also handle contacts. Plan for store openings In terms of the company s store strategy, Shared esearch is keeping an eye on the development of suburban roadside stores. The original plan for was to open 29 roadside stores in Japan, but it now looks more likely there will be just 25 openings (with three openings postponed and one planned opening canceled). For FY8/19, JINS is planning a slightly larger net increase than in, with an estimated 25 to 3 openings and a focus on roadside store and café combinations. SG&A expenses JINS does not plan any large advertising projects for Q4, instead maintaining a level similar to the first three quarters, which should bring advertising for the full year below plan. However, it plans on more aggressive advertising spending from FY8/19 to gain new customers and take back customers that have shifted to competitors. At the same time, aiming to improve its OPM, the company plans to spend efficiently on such advertising. Overseas eyewear (financial year ends in June, with January to March as ) 14/63

15 esearch eport by Shared esearch Inc. In terms of recent developments in the overseas eyewear business, growth in China seems to have slowed slightly. Sales in the US have recently been steady, so JINS believes the phase in which the US was putting pressure on consolidated operating profit has passed. In moving toward the JPY174mn operating profit target for the full year, the US is performing favorably, but China looks set to fall short. Overviews by country are as follows. In China, JINS is maintaining an operating profit on double-digit growth in comparable store sales and the impact of new stores. However, although comparable store sales grew by more than 1% in 1H, growth fell to the upper single digits in. Then performance was solid in April, but sales were actually down YoY in May. Although June returned to double-digit growth, comparable store sales growth appears to be slowing. It is unclear whether there is a structural issue or some issue intrinsic to the company, but JINS does not believe there is any serious issue. It should be noted that as of Q4, there is one extraordinary factor impacting profit. The company closed four stores. These closures were not included in the initial plan but made it necessary to book asset retirement obligations all at once. As these were booked as SG&A expenses, the impact on profit appears significant. We would like to watch sales of Violet Plus kids lenses hereafter. They sell for CNY1,5 (about JPY24,), and some stores have even established kids corners. We will be watching what impact this trend has. In the US, ended with a loss, but the size of the loss shrank. Excluding head office expenses, moving into the black seems to be within sight. Q4 performance has been solid so far, including comparable store sales, and we will be watching trends in the US in FY8/19. US comparable stores have been displaying strong growth since August 217, but this growth may have run its course in July. So far in, comparable store sales increased 33% YoY and customer count increased 28%. They are still maintaining this level recently. In FY8/19, the YoY hurdles will be high, but the business should still be able to accumulate profit. In terms of comparable stores, sales are steadily increasing, and both flagship stores and mall stores are performing favorably with the introduction of frames specifically targeting the US and improved brand recognition. JINS plans to open its fifth US store in an LA mall during FY8/19. It expects this fifth store to contribute to profit from the first year, but believes moving US operations into the black as a whole may still prove difficult. Other malls have also expressed interest in having a JINS store, and the company will consider its options depending on the performance of the fifth store. JINS plans to consolidate Taiwan operations from the beginning of FY8/19 and expects this consolidation to have a positive impact on profit. The store count was 21 at the end of June, which is in line to meet the full-year target of 22. Comparable stores are performing favorably, and JINS plans eventually to expand to 4 stores. Average sales per store are heading above JPY1mn and getting closer to the JPY13 14mn in sales per store (Shared esearch estimate) in the domestic eyewear business. In the Philippines, the first franchise store was opened in April 218. This was the first overseas store with the franchise format. Progress is according to plan. In Hong Kong, JINS established a subsidiary in June 218 and plans to open its first store in fall 218. The impact on earnings is likely to be minimal. Accessories It seems unlikely the accessories business will move into the black even in FY8/19 due to intensifying competition in accessories sales in the apparel market. JINS believes the slump in was caused by declining product appeal and is currently aiming to refresh its lineup of merchandise with the assistance of outside designers. It plans to get back to the basics and have new products in stores from August. Conditions remain somewhat unpredictable, but we are looking forward to hearing details from the company, including its outlook for the accessories business, at the results briefing scheduled for October. Topics Contact lens The company entered the contact lens business and began sales of original daily disposable contact lenses JINS 1DAY via its online store from January 218. The company also began selling this product in its JINS Shibuya store from December 217. The company is considering developing qualified staff and progressively increasing the number of stores offering these contact lenses. According to the company, more than 5% of consumers who purchase daily disposable contact lenses also purchase eyewear at JINS, and over 8% of this group wish to buy disposable lenses at JINS at a reasonable price. The company is planning to begin sales of original contact lenses JINS 1DAY (3 lenses a box at JPY2, excluding tax) in response to such customer needs. The product will be available via company website or app. Leveraging the business model it has developed with eyewear, JINS said it will launch the product in the form of a proprietary brand, which can be offered at a price below market. Sales of contact lenses have apparently been exceeding forecasts. Customers purchase contact lenses more often than eyewear, triggering more frequent use of the JINS website or app, which can in turn lead customers to buy more eyewear. The company is expecting steady growth hereafter. 15/63

16 esearch eport by Shared esearch Inc. The Philippines In March 218, the company announced its intent to sign a franchise agreement with the Philippines-based Suyen Corporation. The company aims to launch the eyewear brand JINS in the Philippines; the first store (SM Aura Premier 1F) opened on April 19, 218. Wholesaling to franchises will contribute to earnings, but the impact on consolidated results is expected to be marginal. Suyen Corporation operates stores in many industries, including apparel, sundries, cosmetics, and restaurants, in the Philippines, US, and China. It also manages many Japanese restaurant brands. JINS stated that Suyen Corporation has a strong relationship of trust spanning 3 years with the SM Group (operator of massive shopping malls in the Philippines and China), and has shown success in operating many different franchise stores. Salon de Megane In April 218, JINS began its new "Salon de Megane" service in which it initially lined up 1 beauty salons nationwide to carry a display of its eyewear. The company is looking to get the number of beauty salons with its eyewear displays up to 1, by the end of 218. The company is expecting this approach to generate monthly sales of a couple of pairs of eyeglasses per salon, which will be booked under e-commerce sales. J of JINS In July 218, the company opened its first J of JINS store. This opening marks the introduction of a new store format J of JINS, which targets high-end customers matching the store concept of those who have an eye for true value. With the focus set on service, the J of JINS stores will be staffed by employees who have obtained the highest meister ranking within the company s in-house qualification system. Prices will be around JPY3, JPY1, for frames and JPY1, JPY8, for a pair of lenses, significantly higher than the company s conventional three price points of JPY5,, JPY8,, and JPY12,. As the target customer base is limited, horizontal expansion is difficult, but by producing quality original products, JINS hopes to improve its brand image and expand its JPY12, lineup for ordinary JINS stores. Development will differ from that for the Black JINS format the company announced at its October 217 results briefing. For the time being, it has no intention of developing a large number of stores using this format. JINS DUG+ In May 218, the company announced the launch of its online drug sales service JINS DUG+. With the goal of becoming a total eyecare company, the company will launch a drug sales service JINS DUG+ through its online shop. The company stated that the initial product lineup will include eye drops and 12 types of supplements, and that it plans eventually to expand sales to multiple stores. Specifically, it plans to leverage its eye information database and develop medical services in partnership with physicians, aiming to provide comprehensive support for all sorts of eye-related issues. During the remainder of 218, JINS is considering a variety of business models, including a collaboration with MEME on new products. LINE Business Connect From July 218, the company began implementing LINE Business Connect in all JINS stores. This allows users to confirm notifications regarding the wait time for eye exams and production time for customer-order items. Customers often have to wait during busy periods on the weekends. However, by linking a list of the waiting order to LINE, it is possible to reduce sales opportunity loss and improve efficiency of store operations. Hong Kong The company announced the launch of its business in Hong Kong, its fifth overseas base, with the first JINS store opened on September 28 in a large shopping mall apm. The store got off to a good start, with long lines for the first several days after opening, so JINS has high hopes it will prove successful. Prior to Hong Kong, the company opened its first store in China in December 21 (133 stores as of end August 218), North America in April 215 (five), Taiwan in November 215 (21), and the Philippines in April 218 (two). There are 349 JINS stores in Japan. JINS has decided to venture into Hong Kong based on the following reasons. 16/63

17 esearch eport by Shared esearch Inc. Anticipated market growth in Hong Kong: With a population of roughly 4,, Hong Kong has a GDP per capita of roughly twice that of Taiwan and has maintained a growth rate higher than that of Japan; JINS track record in overseas business: JINS has succeeded in increasing its influence in all overseas regions it has ventured into so far; and To further accelerate globalization of its business Transfer to a holding company JINS announced it will change the company name to JINS Holdings, Inc. and move to a holding company structure as of July 1, 219. The purpose of this action is for the company to achieve further growth as diversification among its group companies progresses. To this end, the company will undertake the following initiatives: a) Strengthen the function of management strategy planning to optimize group s management resources and improve brand power, b) Clarify profitability and management responsibility at each group company, and c) Accelerate decision-making at each group company to achieve strategic and flexible business operations. The company does not expect any material impact on its consolidated earnings results from this action. For details on previous results, please refer to the Historical Financial Statements section. 17/63

18 esearch eport by Shared esearch Inc. Full-year company forecasts (initial forecast) FY8/19 Init. Est. FY8/19 (JPYmn) 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H Cons. Cons. Cons. Cons. Est. Diff. Init. Est. FY Est. Change Sales 17,745 22,954 21,527 24,662 23,82 26,631 25,294 29,578 29,3 33,5 4,699 46,189 5,451 54,872 54, ,36 62,8 +7,928 Eyewear (Japan) 15,329 19,857 18,165 2,97 19,96 22,246 2,728 24,339 35,186 39,72 42,26 45,67 44, ,26 48,5 +3,433 Stores (JINS) 14,761 19,15 17,396 19,947 19,89 21,297 19,71 23,218 33,776 37,343 4,386 42,919 42, ,237 46,524 +3,65 E-commerce, other ,26 1,121 1,45 1,727 1,819 2,147 2, ,23 1, E-commerce ,79 1,187 1,484 1, ,3 1, Other Eyewear (overseas) 1,68 1,675 1,914 2,222 2,318 2,885 3,273 3,94 2,743 4,136 5,23 7,213 6, ,76 11,5 +4,287 Accessories 1,347 1,421 1,447 1,534 1,542 1,5 1,293 1,296 2,768 2,981 3,42 2,589 2, ,34 2, Women's ,685 1,84-1,898-2, Men's ,295 1,236-1,66-1, YoY.6% 24.% 21.3% 7.4% 1.7% 8.% 6.2% 11.1% 15.8% 13.3% 12.6% 13.5% 9.2% 8.8% 7.9% +.8pp 9.7% 14.4% +5.7pp Eyewear (Japan) % 5.3% 9.9% 6.4% 3.8% 9.4% % 8.% 6.8% 5.4% +.pp 7.2% 7.6% +.pp Stores (JINS) % 4.9% 9.7% 6.8% 3.2% 9.% % 8.1% 6.3% 5.% +.pp 7.1% 8.4% +.pp E-commerce, other % 14.3% 13.1% -.9% 17.9% 18.1% % 5.3% 18.% 14.3% +.pp 11.2% -8.% -.3pp Eyewear (overseas) % 32.7% 21.1% 29.8% 41.2% 36.6% % 25.8% 38.6% 34.3% +.pp 29.9% 59.4% +.2pp Accessories % 8.% 6.6% -2.2% -16.1% -13.6% % 2.% -14.9% -2.5% -.1pp 9.8% 8.1% +.2pp CoGS 4,572 5,82 5,496 6,165 5,824 6,685 6,143 7,273 7,7 8,7 1,375 11,661 12,58 13,416 13, ,59 15,14 +1,724 Gross profit 13,173 17,151 16,31 18,497 17,996 19,946 19,151 22,34 22,23 25,43 3,324 34,528 37,942 41,455 41, ,851 47,66 +6,25 GPM 74.2% 74.7% 74.5% 75.% 75.5% 74.9% 75.7% 75.4% 75.9% 75.9% 74.5% 74.8% 75.2% 75.5% 75.4% +.1pp 75.6% 75.9% +.3pp Eyewear 76.2% 76.4% 76.1% 76.5% 77.1% 73.5% % 76.3% 75.2% 75.5% 75.4% +.1pp 75.6% 75.9% +.4pp Eyewear (Japan) 75.7% 76.1% 77.1% 75.8% 76.6% 76.% % 76.4% 76.3% 76.3% 76.7% 76.6% +.3pp Eyewear (overseas) 76.8% 83.5% 76.8% 56.4% 8.4% 8.2% % 78.7% 8.3% 8.1% +.2pp 79.9% 78.7% -1.6pp Accessories 5.8% 48.7% 52.2% 52.2% 53.7% 51.9% 48.8% 49.4% % 52.2% 52.8% 49.1% 5.3% -1.2pp 51.6% 51.8% +2.7pp SG&A expenses 12,28 14,46 14,843 16,1 15,976 16,564 16,974 18,41 19,75 2,66 26,74 3,844 32,54 35,384 34, ,251 4,41 +5,26 SG&A ratio 69.2% 63.% 69.% 64.9% 67.1% 62.2% 67.1% 62.2% 67.4% 61.7% 65.7% 66.8% 64.5% 64.5% 64.1% +.4pp 63.7% 64.3% -.1pp Operating profit 893 2,691 1,188 2,495 2,19 3,383 2,177 3,894 2,48 4,77 3,585 3,683 5,42 6,71 6, ,6 7,25 +1,179 Eyewear (Japan) 877 2,98 1,334 2,534 2,2 3,498 2,326 3,99 3,785 3,868 5,698 6,235 6, ,4 6, Eyewear (overseas) Accessories YoY -8.1% 34.5% 33.% -7.3% 69.9% 35.6% 7.8% 15.1% 13.9% 22.5% 2.6% 2.7% 46.7% 12.4% 14.3% 22.2% 19.4% Eyewear (Japan) 52.1% -12.9% 64.9% 38.% 5.7% 11.7% % 47.3% 9.4% 6.8% 12.3% 1.7% Eyewear (overseas) % Others 82.1% 168.8% -7.8% % -67.% % - OPM 5.% 11.7% 5.5% 1.1% 8.5% 12.7% 8.6% 13.2% 8.5% 14.2% 8.8% 8.% 1.7% 11.1% 11.3% -.3pp 11.9% 11.5% +.5pp Eyewear (Japan) 5.7% 14.6% 7.3% 12.1% 11.% 15.7% 11.2% 16.1% % 9.9% 13.5% 13.8% 13.7% +.2pp 14.1% 14.2% +.4pp Eyewear (overseas) -1.2% -13.9% -1.8% -3.2% -9.8% -3.4% -.5% 2.2% % -6.7% -6.3% 1.% 2.5% -1.5pp 1.5% 3.9% +2.9pp Accessories 2.1% 1.1% 3.5% 2.8% 3.% -1.1% -1.3% -7.9% % 3.2% 1.% -9.1% -2.8% -6.3pp 3.% -3.6% +5.5pp ecurring profit 843 2,638 1,132 2,472 1,892 3,335 1,921 3,76 2,3 4,54 3,481 3,64 5,227 5,627 5, ,2 6,84 +1,213 YoY -8.5% 31.4% 34.3% -6.3% 67.1% 34.9% -42.4% 11.1% -37.9% 22.5% 18.8% 3.5% 45.% 7.7% 9.5% 18.6% 21.6% PM 4.8% 11.5% 5.3% 1.% 7.9% 12.5% 7.6% 12.5% 7.8% 13.6% 8.6% 7.8% 1.4% 1.3% 1.5% -.3pp 11.2% 1.9% +.6pp Extraordinary gains (losses) Pre-tax profit 752 2,546 1,21 2,31 1,545 2,92 1,748 3,161 2,25 3,79 3,298 3,331 4,465 4,99 5, ,7 6,4 +1,131 Tax charges , , ,45 1,396 1,35 1,697 1,812 1, ,9 2, Implied tax rate 53.9% 38.9% 55.1% 34.1% 42.1% 35.8% 4.8% 34.7% 3.7% 38.3% 42.3% 4.5% 38.% 36.9% 35.2% +.pp 33.3% 35.4% -.pp Net income 347 1, , ,873 1,34 2,63 1,56 2,34 1,92 1,98 2,767 3,97 3, ,8 3,9 +83 YoY -1.2% 81.1% 31.8% -2.1% 95.6% 23.% 15.7% 1.1% 5.9% 13.4% 52.8% 4.1% 39.7% 11.9% 2.5% -8.6pp 37.3% 25.9% +14.pp SG&A expenses 12,28 14,46 14,843 16,1 15,976 16,564 16,974 18,41 19,75 2,66 26,74 3,844 32,54 35,384 34, ,251 4,41 +5,26 Personnel expenses 4,99 4,724 5,3 5,365 5,718 5,657 5,866 6,22 6,91 7,178 8,823 1,368 11,375 12,86 12, ,232 14,88 +2,2 Advertising expenses ,142 1, ,392 1,172 1,83 2,24 1,688 1,898 1, ,18 2, ents (excl. company houses) 2,931 3,639 3,565 3,883 3,911 4,334 4,37 4,734 4,922 5,433 6,57 7,448 8,245 9,41 8, ,862 1,355 +1,314 Depreciation (incl. asset retirement) ,4 1,27 1,14 1,195 1,169 1,38 1,267 1,379 1,915 2,247 2,299 2,477 2, ,262 2, Lease payments Commission fee 1,21 1,485 1,538 1,668 1,585 1,58 1,68 1,957 2,23 2,55 2,686 3,26 3,165 3,637 3, ,79 4, Supplies expenses ,37 1,381 1,423 1,596 1, ,64 1, Other 1,364 1,565 1,536 1,684 1,692 1,878 1,834 2,11 2,91 2,329 2,929 3,22 3,57 3,935 3, ,89 4, YoY 4.8% 25.7% 2.9% 1.7% 7.6% 3.5% 6.2% 11.1% 16.4% 12.2% 15.2% 15.3% 5.5% 8.7% 7.2% 8.3% 14.2% Personnel expenses 15.2% 32.5% 22.1% 13.6% 14.3% 5.4% 2.6% 1.% 17.8% 15.4% 23.8% 17.5% 9.7% 6.3% 7.% 7.5% 16.6% Advertising expenses -53.5% -13.2% 35.1% 7.8% -21.4% -25.6% 8.2% 17.2% 43.2% 26.6% -38.% 2.4% -23.4% 12.4% 13.9% 24.9% 35.1% ents (excl. company houses) 25.3% 38.7% 21.6% 6.7% 9.7% 11.6% 1.1% 9.2% 14.3% 14.8% 32.4% 13.4% 1.7% 9.7% 7.3% 7.5% 14.5% Depreciation (incl. asset retirement) 26.8% 17.8% 12.8% 21.6% 6.2% -1.% 5.9% 9.5% 8.4% 5.4% 22.% 17.3% 2.3% 7.7% 1.% -1.6% 6.8% Lease payments 25.4% 13.3% 13.2% 13.7% 7.6% -6.% -9.1% -6.1% -16.3% -24.8% 18.8% 13.5%.5% -7.7% -12.5% -14.3% -2.5% Commission fee 5.3% 25.3% 28.1% 12.3% 3.1% -5.3% 6.% 23.9% 2.4% 5.% 15.5% 19.4% -1.3% 14.9% 12.7% 17.2% 12.1% Supplies expenses 4.6% 17.7% 9.5% 2.5% 3.4% 2.7% 17.2% 7.7% 7.2% 4.5% 11.4% 5.7% 3.% 12.2% 13.6% 12.7% 5.8% Other 4.4% 26.8% 12.6% 7.6% 1.2% 11.5% 8.4% 11.9% 14.% 1.9% 15.3% 9.9% 1.9% 1.2% 5.% 6.7% 12.3% SG&A ratio 69.2% 63.% 69.% 64.9% 67.1% 62.2% 67.1% 62.2% 67.4% 61.7% 65.7% 66.8% 64.5% 64.5% 64.1% +.4pp 63.7% 64.3% -.1pp Personnel expenses 23.1% 2.6% 23.2% 21.8% 24.% 21.2% 23.2% 21.% 23.6% 21.4% 21.7% 22.4% 22.5% 22.% 22.4% -.3pp 22.1% 22.4% +.4pp Advertising expenses 4.8% 4.3% 5.3% 4.3% 3.8% 3.% 3.8% 3.1% 4.8% 3.5% 4.5% 4.8% 3.3% 3.5% 3.5% -.1pp 3.8% 4.1% +.6pp ents (excl. company houses) 16.5% 15.9% 16.6% 15.7% 16.4% 16.3% 17.% 16.% 16.8% 16.2% 16.1% 16.1% 16.3% 16.5% 16.3% +.2pp 16.% 16.5% +.pp Depreciation (incl. asset retirement) 5.2% 4.3% 4.8% 4.9% 4.6% 4.5% 4.6% 4.4% 4.3% 4.1% 4.7% 4.9% 4.6% 4.5% 4.3% +.2pp 4.1% 4.2% -.3pp Lease payments 1.8% 1.5% 1.7% 1.6% 1.7% 1.4% 1.4% 1.2% 1.%.8% 1.7% 1.7% 1.5% 1.3% 1.2% +.1pp 1.2%.9% -.4pp Commission fee 6.8% 6.5% 7.1% 6.8% 6.7% 5.9% 6.6% 6.6% 6.9% 6.1% 6.6% 6.9% 6.3% 6.6% 6.6% +.1pp 6.7% 6.5% -.1pp Supplies expenses 3.3% 3.1% 3.% 3.% 2.8% 2.8% 3.1% 2.8% 2.9% 2.5% 3.2% 3.% 2.8% 2.9% 3.% -.1pp 2.9% 2.7% -.2pp Other 7.7% 6.8% 7.1% 6.8% 7.1% 7.1% 7.3% 7.1% 7.1% 7.% 7.2% 7.% 7.1% 7.2% 6.9% +.3pp 6.9% 7.% -.1pp Domestic eyewear sales growth Comparable stores -16.8% 7.9% 11.8% -.4% 4.2% 2.5% -.2% 5.3% 5.6% 1.3% -4.1% 4.9% 3.3% 2.7% 6.4% -3.7pp 2.3% 3.3% +.6pp All stores -4.7% 15.7% 17.8% 4.9% 9.7% 6.7% 3.2% 9.2% 1.9% 6.6% 5.8% 1.5% 8.1% 6.4% 2.7% +3.7pp 7.1% 8.6% +2.2pp Store count (Japan) Openings Closures Store count (overseas) China Taiwan Hong Kong US Domestic eyewear sales volume Eyewear (excl. JINS SCEEN) JINS SCEEN Capex (incl. lease guarantee deposits) 985 2,668 1,591 1,57 1,562 1,952 1,877 1,853 3,653 3,161 3,514 3,73 3, ,59 4, New store openings ,12 1,155 1,2 1,28 1, , ,251 enovation , ,91 1, Other 113 1, , ,91 1, , Overseas ,21 1, New store openings (Japan) enovated stores Source: Shared esearch based on company data Note: Figures may differ from company materials due to differences in rounding methods. Note: Taiwan is included in consolidated figures from FY8/19. 18/63

19 esearch eport by Shared esearch Inc. FY8/19: Initial forecast Overview In FY8/19, the company expects sales of JPY62.8bn (+14.4% YoY), and operating profit of JPY7.3bn (+19.4% or +JPY1.2bn YoY). JINS forecasts an OPM of 11.5%, or +.5pp YoY. The company expects each business to grow profits, with the JPY1.2bn rise in operating profit driven by increases of JPY665mn in domestic eyewear, JPY38mn in overseas eyewear, and JPY135mn in accessories. In the overseas business, the company expects China and the US to contribute to profits in earnest as they both post higher sales and profits. Shared esearch notes that the company is increasing domestic comparable store sales by raising customer counts and is opening new stores with a focus on suburban roadside stores. Also, in overseas eyewear, the Taiwan business has been newly consolidated and the US business has entered the store opening phase. In the domestic eyewear business, JINS forecasts sales of JPY48.5bn (+7.6% or +JPY3.4bn). The company expects comparable store sales growth of +3.3% (+5.6% in 1H and +1.3% in 2H) and an increase in store count (26 in and 3 in FY8/19). It plans to raise the average price per pair of glasses from JPY7,3 in (JPY7,2 in 1H and JPY7,36 in 2H) to JPY7,4 in FY8/19. The unit price hurdle is low in 1H, so the company expects to improve comparable store sales by raising the average customer spend in 1H. The company expects a GPM of 76.6% (+.3pp YoY) and a decline of.2pp in the SG&A-to-sales ratio as sales growth absorbs an increase in advertising spending and labor costs. It expects operating profit growth of 1.7% and an OPM of 11.%, down.4pp YoY. In the overseas eyewear business, JINS forecasts sales of JPY11.5bn (+JPY4.3bn YoY) with an operating profit of JPY45mn (+JPY38mn YoY). The Taiwan business has been consolidated from the beginning of FY8/19. The company expects sales of JPY8.bn from China and JPY3.5bn from other businesses (US and Taiwan) and a significant increase in profit from the consolidation of the Taiwan business and store openings at carefully selected locations in China. Operating profit 8, 7, 6, 5, 4, 3, 2, 1, OP (Japan) OP (China; est.) OP (US; est.) Source: Shared esearch based on company data Domestic eyewear business 1,84 2,634 In the domestic business, JINS has taken a number of initiatives after adopting Magnify Life as its brand vision in September 214. In, the company worked to update its product merchandising and improve customer service. In, it continued to enhance its product lineup while focusing on improving existing stores to drive up customer count. In, the company s key priority was to address the remaining issue of increasing customer count. JINS worked to improve product appeal and customer service by enhancing product design and making a strategic move to three price points for its eyewear (in March 217). Further, in April 217 the company changed its name to match its brand name in its quest to establish a global brand. In, in order to clarify the worldview of the JINS brand, the company once again revised and strengthened its product merchandising. It implemented measures to increase sales of Design Project, JINS SCEEN, and Violet Plus, and considers to have been a 7, 6, 5, 4, 3, 2, 1, -1, year for realizing a foundation to support stronger businesses hereafter. 6,223 3,585 3,683 2,973 5,42-1, FY8/5 FY8/7 FY8/9 FY8/11 FY8/13 (JPYmn) 6,71 (JPYmn) 2,973 3,1 FY8/14 Act. Japan China US Init. Est. 3,829 Act. 4,42 Init. Est. 3,962 Act. 4,8 Init. Est. 5,729 6, 6,3 Act. Init. Est. Act. President Hitoshi Tanaka announced at the October 218 results briefing that the company is finally getting down to applying its brand vision, Magnify Life, to specific business processes, and described three initiatives it will be conducting in FY8/19 after years of consideration on the company s future: Product: Violet Plus 19/63

20 esearch eport by Shared esearch Inc. Experience: Next-generation store format Data: Enhanced database In regard to the Product initiative, JINS aims to enhance its development of valuable products, including radically innovative products. The company believes its Violet Plus, which passes violet light in a certain wavelength range, has the potential to be a follow-up product to its JINS SCEEN. It is of the opinion that once people have a proper understanding of the underlying science, they will realize there is even more need for these new lenses than for lenses that cut blue light. JINS seems to be looking at the possibility of creating new markets, possibly even in the area of preventive treatment. Some stores in China have also begun selling Violet Plus, and the company is looking forward to expanding sales even more. Violet Plus (kids lenses) In Q4, the company launched new products for children that are worth keeping an eye on. On July 2, 217, JINS announced a new Functional Eyewear series. Based on research results showing that light with a wavelength of 36 4nm, which is included in sunlight, slows the progress of myopia (December 26, 216 press release by Keio University), the company utilized a propriety design lens in this eyewear that cuts harmful ultraviolet rays (cut by 92%) and blue light (cut by 15%; partially overlaps with 38-5nm wavelength rays) while selectively allowing 36 4nm wavelength rays to transmit (average transmission rate of 65%). This product was named JINS Child s Lens (JPY15, plus frame price). In March 218, the company changed the name to Violet Plus as it began targeting a broader customer base. With the Experience initiative, JINS aims to provide new customer experiences suited to the JINS brand. Previously, its no-additional-option price strategy, with three price points and no additional costs, and same-day delivery (3 minute wait) differentiated the company from many of its competitors, and this served as the driving force behind the company s growth. As digitization progresses, JINS management has been discussing what the next-generation store should look like and has been working on developing store formats. As customers shopping environment changes, including diversification in the manner in which customers receive their purchases, the company has been working to verify just how important same-day delivery is in differentiating the company from the competition. After some trial and error, JINS plans to open a test store in December 218 that leverages the strong points of a brick-and-mortar store by specializing in showrooming and promoting digitization, while also having staff provide advice. The company hopes this format will help it cut down on store inventory and labor costs. The Data initiative is intended to make use of the data JINS holds. For example, it collects optometric data on some 5mn individuals each year. For an eye specialist, this is a huge volume of data. The company believes that if certain actions are taken in addition to collecting the basic optometric data, it would open up a range of possibilities, including referring customers to medical institutions. In addition, pairing the company s own data with MEME data can assist product development and help JINS differentiate itself from the competition. Overseas eyewear business (FY ends in June; results for July to June of the following year are consolidated) The company expects both China and the US to increase sales and profits, and the consolidation of Taiwan should also contribute significantly to increasing sales and profits. In the China eyewear business, the company expects ongoing sales growth at existing stores, even as it uses rigid location screening in opening new stores. In the US, the company expects an ongoing impact on sales growth from the launch of new frames, ongoing increases in customer count, and store openings. In Taiwan (consolidated from beginning of FY8/19) the company is aiming to have 29 stores by end-fy8/19. In the Philippines, wholesaling to franchises should also contribute. China JINS is targeting sales of JPY8.bn (+24.2% YoY) and a net increase of 3 stores in China. It forecasts only a slight increase in operating profit, as it is estimating labor costs, rents, and other SG&A expenses to be fairly high. Note that, unlike Japan, shopping malls in China open before filling all their slots and this impacts the contribution to earnings from new stores. JINS plans to research historical data for store openings at competing firms, carefully considering locations for its new stores. The company does not expect from onward to see low-price competitors as fellow tenants as happened in. It 2/63

21 esearch eport by Shared esearch Inc. believes it will be possible to open 3 stores even as it conducts strict location screening. The company also plans to step up its employee training with an eye on maintaining and accelerating the pace of new store openings. US JINS opened its first US flagship store in August 215 in the Union Square shopping district of San Francisco, and in it opened stores in three shopping malls. In September 216, the company opened one store in the Westfield Santa Anna mall in Los Angeles and another in the Westfield Valley Fair mall in San Jose, California. The third store was opened in October in the Westfield Fashion Square shopping center in Los Angeles. In, JINS was able to move into the black at the store level through various measures such as launching products specifically targeting the US. In FY8/19, the company is targeting a net increase of three stores in West Coast malls, bringing the total to seven. It plans to move carefully on store openings, watching results along the way, but more stores will dilute the fixed costs and allow the US business to move solidly into the black as a whole. At the end of August 218, JINS opened its fifth store, located in a West Coast shopping center (Del Amo Fashion Center, LA), and plans to open two more stores in Q4 FY8/19. Taiwan The Taiwan business has been consolidated from the beginning of FY8/19. Although comparable store sales grew by nearly 1% in, JINS only expects growth of about 2% in FY8/19 as pension reform cools consumer spending. It expects the consolidation of the Taiwan business to account for about half of the increase in both sales and profits in the overseas eyewear business, where it forecasts a JPY4.3bn increase in sales and JPY4mn increase in profits. For the medium term, JINS aims to have 5 stores in Taiwan and targets sales of JPY3 4bn and an operating profit margin of more than 2%. In the case of the company's overseas businesses, the largest impact from foreign exchange rate swings occurs when translating local currency-denominated results into Japanese yen for reporting purposes. (A weakening of the local currency versus the yen would reduce the related operating profit reported by JINS at the consolidated level but, if the overseas business were operating in the red, a weaker local currency would have a positive impact on the earnings reported by JINS because it would reduce the size of those losses in yen-terms.) In the case of China, nearly all of the goods sold are procured locally, nearly all sales are denominated in yuan, and the majority of SG&A expenses are denominated in yuan. This leaves the company's operations in China facing almost no foreign exchange risk. In contrast, the company's US business buys all of its lens locally but it still purchases some frames from Japan. As those purchases are denominated in US dollars, the company's domestic eyewear business is left facing some foreign exchange risk on those sales to the US unit. Going forward, the company plans to eventually put its US business on the same footing as its operations in China, that is, procuring almost all of the goods its sells from local sources. Numerical assumptions Comparable store sales assumptions JINS forecasts domestic comparable store sales for eyewear to rise 5.6% YoY (+1.9% for all stores, including newly opened stores) in 1H FY8/19 and 1.3% YoY (+6.6% for all stores) in 2H, and 3.3% (8.6% for all stores) growth for the full year. The company plans to focus on increasing customer count in both 1H and 2H. It also aims to increase the average customer spend through limits on discounting and an improved product mix. With the range of products it can sell at the JPY5, price point, the company aims to develop new customers, then steadily get them to return for the JPY8, and JPY12, products that express JINS appeal and value. An increase in the number of suburban roadside stores should bring in more seniors, and this will help to raise the average customer spend. In fact, the average senior ratio across all stores is about 18% and rising, while the average for just the suburban roadside stores is 22%, so the strategy is indeed bringing in more seniors as planned. Increasing the number of children coming into stores is an ongoing goal, but this customer segment also seems to be steadily increasing. 21/63

22 esearch eport by Shared esearch Inc. Comparable store sales growth YoY 7% 6% 5% 4% 3% 2% 1% % -1% -2% Source: Shared esearch based on company data New stores 13.7% 11.6% 23.2% -3% FY8/ % 45.6% FY8/ % 32.9% 5.1% -17.6% -17.7% -18.5% -15.4% -24.5% -24.6% FY8/ % 11.6%12.% 3.2% -2.1% 1.% 4.9% 3.6% 3.1% 4.9% 5.7% 1.9% -.7%.3% Initial Est. FY: up 7.8% 1H: up 14.4% 2H: up 2.7% The company expects to have 379 domestic eyewear stores at end-fy8/19 (net YoY increase of 3) and 199 overseas (44). Initial Est. FY: up 2.% 1H: up 2.3% 2H: up 1.8% Initial Est. FY: up 2.3% 1H: up 3.% 2H: up 1.7% Initial Est. FY: up 3.3% 1H: up 5.6% 2H: up 1.3% FY8/19 In Japan the company plans to open 3 stores: 18 in 1H and 12 in 2H. It aims to open 1 15 suburban roadside stores. Judging from the results of the roadside stores opened so far (including store and café combinations), the company believes this looks like a winning store strategy and, taking into further consideration the contribution these stores will make to raise the JINS brand awareness going forward, appears to be planning to pursue a market dominance strategy (to some extent) by opening new roadside stores. In the Maebashi area, for example, JINS has positioned itself to serve a market of some 34, people with an estimated eyewear market value of some JPY1.2bn to JPY1.3bn and, with a total of three stores (one in a shopping center and two roadside stores) is aiming to capture 35% of the local market. In regional markets, JINS appears likely to focus most of its new store openings in and around prefectural capitals starting in Gunma and Tochigi. It already opened a roadside store in Utsunomiya in September 218 and aims to increase its market share with a combination of roadside stores and stores in shopping centers, since the two formats complement each other. In the past, the company opened stores at a pace of more than 4 a year for several years despite having a smaller network (net increase of 41 in FY8/11 to 116, 44 in FY8/12 to 16, 45 in FY8/13 to 25, and 62 in FY8/14 to 267). Furthermore, over FY8/11 13, comparable store sales growth was at least in the double digits. The company believes that it can open 4 stores per year. Shared esearch is watching to see whether the company can build a foundation that enables it to accelerate net increases from FY8/19. Incorporating cafés and video rental shops in stores: JINS is considering opening café/store and rental video/store combinations. There is a natural affinity between JINS eyewear stores and cafés and rental video stores. For example, JINS stores are known for their same-day delivery and, with wait times as short as 3 minutes, many customers can be found waiting for their order to be completed in a nearby café. This got the company thinking it might be worthwhile to use a café format with a brand image that closely matched its own; it already appears to be benefiting from the expected synergies the cafés provide, and therefore used the café format for all nine of the roadside stores it opened in. Domestic eyewear store count 4 Japan 5 oadside FY8/9 FY8/1 FY8/11 FY8/12 FY8/13 FY8/14 FY8/19 Est. Source: Shared esearch based on company data FY8/19 Est. Overseas the company aims for a net increase of 44 stores (22 in each half), with 3 in China, eight in Taiwan, three in Hong Kong, and three in the US. It believes there will not be any problem opening 3 stores in China, even with strict location 22/63

23 esearch eport by Shared esearch Inc. screening. Taiwan has been included in consolidation since the beginning of FY8/19. Store openings in the US carry a greater risk than in Japan or China, so JINS plans to move carefully, watching results along the way as it steadily opens stores. Overseas eyewear store count 2 China 1 US 4 Taiwan Source: Shared esearch based on company data FY8/13 FY8/14 FY8/19 Est FY8/19 Est FY8/19 Est Unit sales Domestic unit sales topped 6mn for the first time in, and JINS forecasts 6.5mn in FY8/19, increasing for the fourth year in a row. JINS SCEEN (to block UV light from screens) is forecast to post sales of 2.5mn units for both nonprescription and prescription. JINS SCEEN has surpassed 1mn cumulative units sold and regularly accounts for about 3% of total sales, so JINS views it as a staple product. Domestic eyewear sales volume (mn units; breakdown estimates by Shared esearch) JINS SCEEN JINS SCEEN as % of total eyewear Eyewear (excl. JINS SCEEN) % 38% 3. 35% 32% 2. 29% Eyewear (excl. JINS SCEEN) JINS SCEEN % 1. 23% (mn) FY8/12 FY8/13 FY8/14 FY8/19 Est. Source: Shared esearch based on company data 2%. 1H FY8/13 1H FY8/14 1H 1H 1H 1H GPM JINS forecasts GPM of 75.9%, a.4pp increase over, since the ratio of the overseas business, which has a higher GPM, is increasing. The company targets 76.6% (+.3pp YoY) in the domestic eyewear business and 78.7% (-1.6pp YoY) in the overseas eyewear business. It expects the.3pp improvement in the domestic business to come from ongoing limits on discounting, an improved product mix, and the absence in FY8/19 of losses of roughly JPY13mn that occurred in Q4 and Q4 with the disposal of MEME-related inventory. eductions in the cost of frames should also help throughout the year, even if the impact is minor. In the overseas eyewear business, JINS expects the GPM for China to be level with, and the GPM for the US business to fall slightly as the impact of lower lens procurement costs runs its course. The Taiwan business was newly consolidated from the start of FY8/19, and the ratio of low-cost optional lenses is high, so the GPM is low at 75.5%, putting downward pressure on the GPM of the overseas business overall. 23/63

24 esearch eport by Shared esearch Inc. Gross profit margin 35, 3, 25, 2, 15, 1, 5, (JPYmn) 7.2% Source: Shared esearch based on company data SG&A expenses Sales Gross profit GPM (right axis) 73.1% 71.2% 7.7% 72.4% 2,483 2,85 3,556 3,965 1H 2H FY8/9 1H 2H FY8/1 For SG&A expenses, JINS is forecasting a 14.2% YoY increase to JPY4.4bn. The SG&A-to-sales ratio rose by 1.1pp YoY to 66.8% in, fell by 2.3pp YoY to 64.5% in, and remained flat at 64.5% in. The company expects a.2pp YoY decline to 64.3% in FY8/ % 4,886 5,82 1H 2H FY8/ % 75.3% 75.8% 74.4% 7,137 9,879 1H 2H FY8/12 72.% 72.9% 74.2% 74.7% 74.5% 75.% 75.5% 74.9% 18,497 17,151 17,996 19,946 19,151 16,31 13,388 14,57 12,687 13,57 13,173 1H 2H FY8/13 1H 2H FY8/14 1H 2H 1H 2H 1H 2H 75.7% 75.4% 75.9% 75.9% 1H 22,34 22,23 76% 74% 25,43 2H 1H Est. 2H Est. FY8/19 FY8/19 Init. Est. FY8/19 (JPYmn) 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H Cons. Cons. Cons. Cons. FY Est. Change GPM 74.2% 74.7% 74.5% 75.% 75.5% 74.9% 75.7% 75.4% 75.9% 75.9% 74.5% 74.8% 75.2% 75.5% 75.9% +.3pp Eyewear 76.2% 76.4% 76.1% 76.5% 77.1% 73.5% % 76.3% 75.2% 75.5% 75.9% +.4pp Eyewear (Japan) 75.7% 76.1% 77.1% 75.8% 76.6% 76.% % 76.4% 76.3% 76.6% +.3pp Eyewear (overseas) 76.8% 83.5% 76.8% 56.4% 8.4% 8.2% % 78.7% 8.3% 78.7% -1.6pp Accessories 5.8% 48.7% 52.2% 52.2% 53.7% 51.9% 48.8% 49.4% % 52.2% 52.8% 49.1% 51.8% +2.7pp 72% 7% 68% 66% 64% The company has budgeted a JPY666mn YoY increase to JPY2.6bn in pure advertising expenses. It plans to spend more aggressively in FY8/19, but the specifics as to what will actually be implemented are still under discussion. The company plans to spend more in 1H, especially Q2, as it tries to achieve at least a 1.3% YoY increase in comparable store sales in 2H. JINS forecasts a 16.6% YoY increase in labor costs to JPY14.1bn. It expects greater upfront spending on systems to improve man-hour productivity and on human resources hiring. In addition, because it recognizes there are lost sales opportunities on weekends, it plans to increase the number of employees per store. This means lowering the ratio of full-time employees and increasing the ratio of part-timers. The company forecasts a 14.5% YoY rise in rents to JPY1.4bn because the ratio of the China business, which has comparatively high rents, has increased. Employee count 2,5 2, 1,5 No. of employees No. of temporary employees Years of service (right axis) 1,485 1,465 1, , 633 1,524 1,83 1, , FY8/6 FY8/7 FY8/8 FY8/9 FY8/1 FY8/11 FY8/12 FY8/13 FY8/14 Source: Shared esearch based on company data /63

25 esearch eport by Shared esearch Inc. SG&A expenses FY8/19 Init. Est. FY8/19 (JPYmn) 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H Cons. Cons. Cons. Cons. FY Est. Change SG&A expenses 12,28 14,46 14,843 16,1 15,976 16,564 16,974 18,41 19,75 2,66 26,74 3,844 32,54 35,384 4,41 +5,26 Personnel expenses 4,99 4,724 5,3 5,365 5,718 5,657 5,866 6,22 6,91 7,178 8,823 1,368 11,375 12,86 14,88 +2,2 Advertising expenses ,142 1, ,392 1,172 1,83 2,24 1,688 1,898 2, ents (excl. company houses) 2,931 3,639 3,565 3,883 3,911 4,334 4,37 4,734 4,922 5,433 6,57 7,448 8,245 9,41 1,355 +1,314 Depreciation (incl. asset retirement) ,4 1,27 1,14 1,195 1,169 1,38 1,267 1,379 1,915 2,247 2,299 2,477 2, Lease payments Commission fee 1,21 1,485 1,538 1,668 1,585 1,58 1,68 1,957 2,23 2,55 2,686 3,26 3,165 3,637 4, Supplies expenses ,37 1,381 1,423 1,596 1, Other 1,364 1,565 1,536 1,684 1,692 1,878 1,834 2,11 2,91 2,329 2,929 3,22 3,57 3,935 4, YoY 4.8% 25.7% 2.9% 1.7% 7.6% 3.5% 6.2% 11.1% 16.4% 12.2% 15.2% 15.3% 5.5% 8.7% 14.2% Personnel expenses 15.2% 32.5% 22.1% 13.6% 14.3% 5.4% 2.6% 1.% 17.8% 15.4% 23.8% 17.5% 9.7% 6.3% 16.6% Advertising expenses -53.5% -13.2% 35.1% 7.8% -21.4% -25.6% 8.2% 17.2% 43.2% 26.6% -38.% 2.4% -23.4% 12.4% 35.1% ents (excl. company houses) 25.3% 38.7% 21.6% 6.7% 9.7% 11.6% 1.1% 9.2% 14.3% 14.8% 32.4% 13.4% 1.7% 9.7% 14.5% Depreciation (incl. asset retirement) 26.8% 17.8% 12.8% 21.6% 6.2% -1.% 5.9% 9.5% 8.4% 5.4% 22.% 17.3% 2.3% 7.7% 6.8% Lease payments 25.4% 13.3% 13.2% 13.7% 7.6% -6.% -9.1% -6.1% -16.3% -24.8% 18.8% 13.5%.5% -7.7% -2.5% Commission fee 5.3% 25.3% 28.1% 12.3% 3.1% -5.3% 6.% 23.9% 2.4% 5.% 15.5% 19.4% -1.3% 14.9% 12.1% Supplies expenses 4.6% 17.7% 9.5% 2.5% 3.4% 2.7% 17.2% 7.7% 7.2% 4.5% 11.4% 5.7% 3.% 12.2% 5.8% Other 4.4% 26.8% 12.6% 7.6% 1.2% 11.5% 8.4% 11.9% 14.% 1.9% 15.3% 9.9% 1.9% 1.2% 12.3% SG&A ratio 69.2% 63.% 69.% 64.9% 67.1% 62.2% 67.1% 62.2% 67.4% 61.7% 65.7% 66.8% 64.5% 64.5% 64.3% -.1pp Personnel expenses 23.1% 2.6% 23.2% 21.8% 24.% 21.2% 23.2% 21.% 23.6% 21.4% 21.7% 22.4% 22.5% 22.% 22.4% +.4pp Advertising expenses 4.8% 4.3% 5.3% 4.3% 3.8% 3.% 3.8% 3.1% 4.8% 3.5% 4.5% 4.8% 3.3% 3.5% 4.1% +.6pp ents (excl. company houses) 16.5% 15.9% 16.6% 15.7% 16.4% 16.3% 17.% 16.% 16.8% 16.2% 16.1% 16.1% 16.3% 16.5% 16.5% +.pp Depreciation (incl. asset retirement) 5.2% 4.3% 4.8% 4.9% 4.6% 4.5% 4.6% 4.4% 4.3% 4.1% 4.7% 4.9% 4.6% 4.5% 4.2% -.3pp Lease payments 1.8% 1.5% 1.7% 1.6% 1.7% 1.4% 1.4% 1.2% 1.%.8% 1.7% 1.7% 1.5% 1.3%.9% -.4pp Commission fee 6.8% 6.5% 7.1% 6.8% 6.7% 5.9% 6.6% 6.6% 6.9% 6.1% 6.6% 6.9% 6.3% 6.6% 6.5% -.1pp Supplies expenses 3.3% 3.1% 3.% 3.% 2.8% 2.8% 3.1% 2.8% 2.9% 2.5% 3.2% 3.% 2.8% 2.9% 2.7% -.2pp Other 7.7% 6.8% 7.1% 6.8% 7.1% 7.1% 7.3% 7.1% 7.1% 7.% 7.2% 7.% 7.1% 7.2% 7.% -.1pp SG&A expenses 2,8 2,4 11.3% 11.2% 2, 1,6 1, % 672 1, % 1, % 1, % 2, % 1, % 1, % 4.8% 4.8% 4.3% 4.3% 3.8% 3.8% 3.% 3.1% 3.5% ,142 14% Advertising expenses (pure ads) % of sales (JPYmn) 1H 1H 1H 1H 1H 1H 1H 1H 1H Est. FY8/11 FY8/12 FY8/13 FY8/14 FY8/19 1, ,392 1,172 12% 1% 8% 6% 4% 2% % 2,5 2, 1,5 1, 5 4.4%4.4% 4.1% 5.1% 4.6% Commission fee % 6.8% 6.% 6.5%6.4%6.8% 6.5% 6.7% 6.6%6.6% 6.9% 5.9% 6.1% 1,136 1,141 1,185 1H 1H 1H 1H 1H 1H 1H 1H 1H Est. (JPYmn) FY8/11 FY8/12 FY8/13 FY8/14 FY8/19 1,21 1,485 % of sales 1,538 1,668 1,585 1,58 1,68 1,957 2,23 2,55 1% 8% 6% 4% 2% % 6, 5, 4, 3, 13.3% 13.5% 2, 12.8% 12.6% 1, 899 1,58 1,212 1, % 2, % 12.6% 2,377 2,34 ents 14.2% 2,624 2,931 3,639 Source: Shared esearch based on company data % of sales 17.% 16.5% 16.6% 16.8% 16.4% 16.3% 15.9% 16.% 16.2% 15.7% (JPYmn) 1H 1H 1H 1H 1H 1H 1H 1H 1H Est. FY8/11 FY8/12 FY8/13 FY8/14 FY8/19 3,565 3,883 3,911 4,334 4,37 4,734 4,922 5,433 2% 18% 16% 14% 12% 1% 1,8 1,6 1,4 1,2 1, % % % 5.% 4.1%4.7% 451 Depreciation and lease expenses % 6.5%6.5% 6.2% 6.3%5.9% 5.9% 6.% 5.6% 5.6% 5.4% 4.9% 987 1,152 1H 1H 1H 1H 1H 1H 1H 1H 1H Est. (JPYmn) FY8/11 FY8/12 FY8/13 FY8/14 FY8/19 1,248 1,343 1,49 1,65 1,51 % of sales 1,569 1,53 1,659 1,569 1,643 9% 8% 7% 6% 5% 4% 3% 2% 1% % Brand vision Magnify Life (reference) To revitalize its image, the company coined Magnify Life as its new corporate slogan in September 214 as part of its efforts to respond to changes in the eyewear market and solidify a foundation for global growth. As the company s performance struggled, two key issues became apparent: Products: Poor selection due to heavy reliance on high sales volume products, routine price reductions; Stores: Opportunity losses stemming from overemphasis on store efficiency. JINS viewed solving the above two issues as paramount to its future success, and after internal debate on the company s core values, JINS introduced Magnify Life, its new brand vision. : updated product merchandising and improved customer service. : improved existing stores In, under Magnify Life, the company moved to update its product merchandising and improve its customer service (store operations). This resulted in comparable store sales improvement exceeding expectations during 2H. JINS describes its current state as JINS eborn. However, challenges remain, as the company believes that the improvement in comparable store sales during 2H was partially attributable to higher average customer spend and expanded sales to existing customers; JINS continued working to attract new customers and expand into new customer 25/63

26 esearch eport by Shared esearch Inc. segments during. Focus will be placed on improvements at existing stores during, and once the company deems performance of existing stores to be acceptable, it will once again take up its medium-term goal to reach 5 domestic stores. : Improved customer count in. Improved product appeal (design), shifted pricing strategy (March), unified brand/company name After the company's efforts to increase its customer count during failed to produce the desired increase, the company looked at the problem and determined that its product lineup was lacking. More specifically, the company felt that it needed to focus on real product quality to reach customers. This was behind the company's decision to keep increasing its customer count as its top priority again in. Toward this end, the company planned to 1) improve its merchandise lineup and 2) open up more roadside stores with the aim of increasing its customer base among the senior demographic. Improvements to its product offering took the form of both higher quality and new designs that the company believes will help distinguish its eyewear from competitors. The company developed higher quality products under the guidance of outside designers and in March executed a strategic shift to three price points. As a result, customer count resumed growth in. In terms of store openings, the company fell short of its initial targets for net increase and number of suburban roadside stores. However, JINS set up an in-house suburban store development team with the aim of accelerating store rollout in. We note that President Hitoshi Tanaka first referenced plans for new products during the company's results presentation in October 215, saying he wanted to bring forth the kind of innovative new product that everyone who wears glasses would want to buy. However, the new product lineup, initially slated to be launched in, was delayed and was to be rolled out in phases over the course of the financial year. At the October 217 results presentation there was a further delay announced (launch date to be determined). : revamped merchandising to clarify JINS brand. Boosted online strategy targeting 1% of sales; groundwork for future growth CEO Tanaka said that that while the initiatives over the three years had put the business on a more solid footing, he felt that the brand s position and character had become somewhat blurry. In, in order to clarify the image of the JINS brand, the first move will be to once again review and enhance product merchandising. Historical Performance vs. Estimates esults vs. Initial Est. FY8/7 FY8/8 FY8/9 FY8/1 FY8/11 FY8/12 FY8/13 FY8/14 (JPYmn) Parent Parent Parent Parent Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Sales Initial Est. 5, 6,75 7,68 8,99 13, 18,6 29,4 36,6 4,45 48,5 51, 55,36 esults 5,12 6,222 7,434 1,64 14,575 22,614 36,554 36,15 4,699 46,189 5,451 54,872 esults vs. Initial Est. 2.% -7.8% -3.2% 17.9% 12.1% 21.6% 24.3% -1.2%.6% -4.8% -1.1% -.9% Operating profit Initial Est ,7 3,9 2,5 3,4 4,3 4,8 6,6 esults ,84 2,634 6,223 2,973 3,585 3,683 5,42 6,71 esults vs. Initial Est % 6.8% 148.1% 31.8% 54.9% 59.6% 18.9% 5.4% -14.3% 12.5% -8.% ecurring profit Initial Est ,66 3,86 2,495 3,35 4,1 4,5 6,2 esults ,53 2,552 5,869 2,929 3,481 3,64 5,227 5,627 esults vs. Initial Est % -71.1% 27.4% 161.1% 32.9% 53.7% 52.% 17.4% 3.9% -12.1% 16.2% -9.2% Net income Initial Est ,8 1,23 1,9 2,3 2,6 3,8 esults ,9 3,419 1,245 1,92 1,98 2,767 3,97 esults vs. Initial Est % % -36.% 242.% 7.6% 55.6% 9.% 1.2%.1% -13.9% 6.4% -18.5% Source: Shared esearch based on company data Note: Figures may differ from company materials due to differences in rounding methods. 26/63

27 esearch eport by Shared esearch Inc. Long-term outlook As of February 213, the company CEO has indicated that he would like JINS to hit JPY1bn in sales in 218, earlier than (originally indicated) 22. The company s goals for the medium term are 5 domestic stores and 1 stores in China, with JPY15mn in annual sales for each Japanese store and JPY1mn in annual sales for each Chinese store. Magnify Life To revitalize its image, the company coined Magnify Life as its new corporate slogan in September 214 as part of its efforts to respond to changes in the eyewear market and solidify a foundation for global growth. In, JINS plans to further companywide acceptance of its brand vision while deepening understanding of its Mission and Attitude, eventually moving to accomplish the same task to those outside of the company. As the company s performance was struggling when the vision was defined in September 214, two key issues had become apparent: Products: Poor selection due to heavy reliance on high sales volume products, routine price reductions; Stores: Opportunity losses stemming from overemphasis on store efficiency. JINS viewed solving the above two issues as paramount to its future success, and after internal debate on the company s core values, JINS introduced Magnify Life, its new brand vision. Product strategy: fundamental rethinking of merchandising format During FY8/14, the company established a product strategy in line with its vision of Magnify Life, and terminated products that were not fit for the strategy. It also closed stores and reassessed facilities that would not contribute to this new brand image. In association with this, the company booked an extraordinary loss of JPY473mn. To move away from a stale product lineup that was the result of a heavy focus on high-volume products, the company is working to implement a complete overhaul of its product portfolio. Products will be categorized into standard and nonstandard products, with standard products representing designs that will be attractive to any customer that visits a JINS store. The company maintains that this will lead to higher purchase frequency and customer count. Standard products will have conservative designs, and nonstandard products will be further classified into two product types: Trend products with limited availability (to be sold out within one to two months), and seasonal products (to remain on shelves for an entire season). Nonstandard products will be designed according to a preset theme, and incorporate trends current at the time. JINS aims to increase customer count via providing products that cater to clients with both conservative and fashion-minded views. Uniformity in its product line had created the issue in which some clients were unable to find frame styles that suited their tastes. Magnify Life will remedy this situation by implementing changes to prevent excess uniformity. Standard products will be classified as such by headquarters, based on sales results; these decisions will not be for individual stores to make. Similarly, the duties of deciding which nonstandard products to provide in-store are also the responsibility of corporate headquarters, while also taking into account the unique needs of individual stores. JINS will work to introduce a product strategy in line with the Magnify Life concept line. Product strategy: higher sales composition of JPY7,9 and JPY9,9 items JINS aims to shift from a company that customers view with carrying cheap products, to a company that provides reasonably priced and fashionable items. Of the four price points that the company currently has set for its products (JPY4,9; JPY5,9; JPY7,9; JPY9,9), JINS will introduce more nonstandard products on the higher end, building a product portfolio that will encourage consumers to spend more for each pair of eyewear. 27/63

28 esearch eport by Shared esearch Inc. The company also does not think that strict adherence to the above pricing structure is a necessity; products that warrant the additional cost may be priced outside of these boundaries. For example, the Koyama Kundo and JINS Classic collaborative eyewear are sold at a price of JPY21,1. Product strategy: merchandising refresh complete in Introduction of new products conforming to the Magnify Life concept was completed in May and June 215, completing the new product strategy for Magnify Life. Product strategy: limiting price reductions Standard products will stay on store shelves for extended periods of time, and additional units will be produced as required. Production efficiency will be improved from using the same molds for longer periods, and maintaining consistent pricing will improve profitability. If operations for standard models progresses smoothly, Shared esearch understands that it is possible for margins to improve. Special sales will still be held once every six months to sell off unsold inventory of nonstandard items, but these will be the exception to the rule. Product strategy: with the PDCA cycle functioning, more effectiveness in inventory control and precision in additional orders In accounting for healthy sales of its standard products as of, JINS cites the critical role of the PDCA cycle from development to stores. In the company s view, the poor performance resulting from quick opening of stores and the negative effect of PC glasses could have been avoided had the PDCA cycle been in place. It now ensures effectiveness in inventory control and precision in additional orders by running the same cycle per function every week, month, and season. According to the company, its standard products are monitored and regulated on a weekly basis, while the rate of success with the non-standard products is also improving. JINS plans to put the non-standard products on the market every season and quarter, as well as on an as-needed basis. We will keep an eye on how the company manages to stimulate the consumers cycle of eyewear buying. Boosting product appeal: JINS Design Project underway The company plans to continue focusing on boosting product appeal. Improving its product lineup is one way to increase store sales, since the roll out of an attractive new product line would both encourage existing customers to make repeat purchases and bring in new customers. In, JINS recruited outside designers to make a comprehensive review of its standard products with the aim of improving its perceived product quality. The company is taking criticism of its eyewear's unattractive design and cheap appearance seriously, and is working to come up with more appealing designs. It reviewed products by category, and rolled out new frames with stronger customer appeal in stages over the course of. It appears that this helped boost customer count as consumers appreciated the new designs. With the company set to continue its efforts to enhance its product lineup in, we expect to the favorable impact on sales not just this year but in subsequent years, with the impact growing with each passing year. The JINS Design Project got underway in. The company said that it would launch new designs on an ongoing basis. A collaboration with Jasper Morrison in October 217 was the first such project, followed by a collaboration with Konstantin Grcic in June 218 as the second such project. The company said it aims to question the traditional definition of eyewear and rebuild it from the viewpoint of shape and materials. The company said the project was to design eyewear from the very essence (the first efforts also include JINS SCEEN products) to provide eyewear that has value for the coming era. By turning the Design Project into a series, it aims to raise design quality overall. Store operations and personnel Taking a step away from its focus on pure efficiency, the company has set forth as its ultimate goal an ideal customer experience in line with Magnify Life. To achieve this, JINS improved customer service and personnel evaluation methods during. 28/63

29 esearch eport by Shared esearch Inc. Customer service and store operations: increasing skilled personnel Primary issues at stores were long wait times and opportunity losses. A decreasing proportion of experienced full-time employees and an increasing proportion of inexperienced part-time employees led to longer wait times for customers and opportunity losses. This stemmed from the company s rapid expansion and lower number of employees per store in an effort to keep the SG&A-to-sales ratio low. The average tenure of employment at JINS was 3.4 years, and the average employee age was 28.2 years during FY8/13. This indicates that there is a shortage of experienced and knowledgeable employees within the company. Although its employee turnover rate has not changed, JINS is concerned that skilled employees are leaving the company, causing greater damage to store operations than the numbers indicate. According to the company s analysis, if comparable store sales were down 2% YoY, 1% of this number is attributable to store operations. An experiment run by the company during Q4 FY8/14 showed that when two experienced employees were added to the staff of a store over the busy weekend period, sales were significantly higher; as much as 13% by company estimates. To combat this issue, JINS has produced a number of solutions, such as employee training, improving the ratio of full and part time employees, and effective use of regional permanent employees. Although personnel expenses will increase, JINS believes that the reduction in opportunity losses and the increase in revenue will produce a net positive result. JINS eborn In, under Magnify Life, the company moved to update its product merchandising and improve its customer service (store operations). This resulted in comparable store sales improvement exceeding expectations during 2H. JINS describes its current state as JINS eborn. However, challenges remain, as the company believes that the improvement in comparable store sales during 2H was partially attributable to higher average customer spend and expanded sales to existing customers; JINS will aim to attract new customers and expand into new customer segments during. Once the company deems performance of existing stores to be acceptable, it will once again take up its medium-term goal to reach 5 domestic stores. In Shared esearch s view, JINS is also likely to increase its marketing aggressiveness once an opportunity to maximize effectiveness presents itself. Marketing strategy Instead of relying heavily on television commercials, JINS plans to shift to an environment that will allow employees and customers to share in its brand vision, and promote sales via a shared community. The company maintains that through the above measures, it can secure global growth. 29/63

30 esearch eport by Shared esearch Inc. Business Business description JINS is an eyewear retailer. As of, it operated 349 JINS-branded eyewear stores across Japan, and sold about 6.4mn pairs of eyeglasses in the same year. In 29, the company made a radical shift in its strategy, attempting to redraw the eyewear market map and redefine what it means to retail eyeglasses. It is probably fair to say that if it is successful, the ripple effects in the Japanese eyewear market could be even more pronounced than the impact that Fast etailing has had on apparel retail. The company sees its approach as fundamentally different from the competition. Eyeglass retailers traditionally see their business as one of correcting vision. JINS believes that eyewear should be seen as lifestyle gear, with elements of fashion and functionality joined together. JINS wants to offer eyewear at prices that make it possible for an average consumer to treat the pair of eyeglasses in the same way as they treated the UNIQLO fleece in 21 or Nitori dinnerware in 29 feel real value, appreciate the quality, and buy several pieces at a time. In order to achieve this, JINS needs to perfect the use of the SPA model, something that has never been truly attempted in eyewear retail. Even more importantly, it needs to develop innovative products that sell, consistently. The company has just made its first baby steps in this direction (e.g., new store designs and Airframe brand and Functional Eyewear glasses). The jury is still out on whether it can live up to its promise. However, Shared esearch believes that as the only listed eyewear retailer attempting to spurn traditional retailing assumptions and redefine its business and the market, it deserves attention. Operating profit OP (Japan) OP (China; est.) OP (US; est.) 7, 6,223 6,71 6, 5,42 5, 4, 3,585 3,683 2,973 3, 2,634 2, 1, , , FY8/5 FY8/7 FY8/9 FY8/11 FY8/13 (JPYmn) Domestic store count 7, 6, 5, 4, 3, 2, 1, -1, (JPYmn) 2,973 3,1 FY8/14 Act. Japan China US Init. Est. 3,829 Act. 4,42 Init. Est. 3,962 Act. 4,8 Init. Est. 5,729 6, 6,3 Act. Init. Est. Act Openings Closures Store count in Japan H FY8/7 1H FY8/8 1H FY8/9 1H FY8/1 Source: Shared esearch based on company data 1H FY8/11 1H FY8/12 1H FY8/13 1H FY8/14 1H 1H 1H 1H /63

31 esearch eport by Shared esearch Inc. Number of eyeglasses sold JINS SCEEN JINS SCEEN as % of total eyewear Eyewear (excl. JINS SCEEN) % 38% 3. 35% 32% 2. 29% Eyewear (excl. JINS SCEEN) JINS SCEEN % 1. 23% (mn) FY8/12 FY8/13 FY8/14 FY8/19 Est. Source: Shared esearch based on company data 2%. 1H FY8/13 1H FY8/14 1H 1H 1H 1H Business Model Three price points JPY5,, JPY8,, and JPY12, (excluding tax): all-inclusive, with no additional costs JINS sells its eyewear at the three price points above. The price includes lenses and a case. There are no additional charges, with a small exception of colored and progressive lenses which add JPY3, and JPY5, respectively to a set price. The all-inclusive, no-additional-option price strategy differentiates the company from many of its competitors who base prices on different lens and frame combinations. The aims are twofold: to tap into a new customer base by boosting the product appeal of the JPY5, range and increase customer count, and to boost average customer spend through a value appeal. The company thinks it will be able to express the attractiveness and value of the JINS brand with a JPY12, product, which was not possible with a JPY9,9 product, and that this should boost customer count and average customer spend. The company aims to create a finely tuned product mix tailored to store location and customer demographics. The aim is to increase the number of customers that buy the company s products not because they are cheap but because they are JINS products, by boosting the product appeal and increasing customer count for each of the JPY5,, JPY8,, and JPY12, price points. JINS believes the JPY12, products will steadily contribute to branding. Lenses and frames contribute approximately equal proportions of the gross profit per pair (with GPMs of roughly 75%). One remarkable fact to note is that despite substantially lower prices compared to most of its competitors, JINS GPMs are essentially the same as those of the rivals. Also, OPM is high compared to others in the industry. Shared esearch thinks that this is because its business structure leads to high product turnover. Creation of an SPA (Specialty Store etailer of Private Label Apparel) value chain For frames, the design is mostly done internally and manufacturing is outsourced to multiple manufacturers in China, Korea, and Vietnam. For the lenses, up to FY8/12, they were essentially sourced from a single manufacturer, HOYA (TSE1: 7741). With the October 211 flood in Thailand, where HOYA has major manufacturing facilities, securing the lens supply became a serious concern. In response, JINS commenced direct procurement from a subsidiary of a major overseas lens manufacturer. As a result, lenses were now sourced domestically (from HOYA, on consignment) and directly from overseas plants (the company bears foreign-exchange risk and logistics costs). From, the company expanded to three sourcing channels, which has helped lower lens procurement costs. This differentiates JINS from its competitors who heavily rely on consignment sourcing for lenses. This change in procurement practices to include overseas factory procurement channels meant new inventory and forex exposure risks for JINS. At the same time however, having a third channel reduces risk for the company and enables cost savings. 1% of the lenses JINS offers in its stores are thin aspherical lenses. As a strong yen and other factors are causing hollowing out of domestic manufacturing, the company has pounced on the opportunity and was able to contract a precision device and parts manufacturer to manufacture high quality frames using the latter s underutilized equipment. 31/63

32 esearch eport by Shared esearch Inc. SG&A: personnel expenses increase due to efforts to improve customer service and store operation. Marketing strategy ties into efforts to revamp product merchandising The largest SG&A cost components are unsurprisingly labor and rent. JINS stores are staffed with more people than competitors (about 8, vs. about 5 in other stores) to handle varying customer traffic and because shopping mall stores have long opening hours. The rent setup is typical for retailers opening tenant stores in shopping centers, a variable amount per based on sales, with minimum guarantees. Personnel expenses have also been on the rise since, due to efforts to improve customer service and store operation as outlined in Magnify Life, JINS brand vision. JINS started using TV commercials in the marketing mix in FY8/1. This was also based on the marketing strategy laid out as part of its Magnify Life brand vision. Once the company saw that the TV commercials had maximized their effect, it stepped up other marketing efforts: in, in a more active approach, it has been conducting more efficient marketing, including the launch of a campaign that coincides with efforts to revamp product merchandising. While the company has experimented with more aggressive advertising on television, the failure of the television ad campaigns it ran in December 215 and again in March 216 did not produce the results expected and so the company decided to shift its strategy and focus instead on enhancing its product lineup from onward. SG&A expenses FY8/19 Init. Est. FY8/19 (JPYmn) 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H Cons. Cons. Cons. Cons. FY Est. Change SG&A expenses 12,28 14,46 14,843 16,1 15,976 16,564 16,974 18,41 19,75 2,66 26,74 3,844 32,54 35,384 4,41 +5,26 Personnel expenses 4,99 4,724 5,3 5,365 5,718 5,657 5,866 6,22 6,91 7,178 8,823 1,368 11,375 12,86 14,88 +2,2 Advertising expenses ,142 1, ,392 1,172 1,83 2,24 1,688 1,898 2, ents (excl. company houses) 2,931 3,639 3,565 3,883 3,911 4,334 4,37 4,734 4,922 5,433 6,57 7,448 8,245 9,41 1,355 +1,314 Depreciation (incl. asset retirement) ,4 1,27 1,14 1,195 1,169 1,38 1,267 1,379 1,915 2,247 2,299 2,477 2, Lease payments Commission fee 1,21 1,485 1,538 1,668 1,585 1,58 1,68 1,957 2,23 2,55 2,686 3,26 3,165 3,637 4, Supplies expenses ,37 1,381 1,423 1,596 1, Other 1,364 1,565 1,536 1,684 1,692 1,878 1,834 2,11 2,91 2,329 2,929 3,22 3,57 3,935 4, YoY 4.8% 25.7% 2.9% 1.7% 7.6% 3.5% 6.2% 11.1% 16.4% 12.2% 15.2% 15.3% 5.5% 8.7% 14.2% Personnel expenses 15.2% 32.5% 22.1% 13.6% 14.3% 5.4% 2.6% 1.% 17.8% 15.4% 23.8% 17.5% 9.7% 6.3% 16.6% Advertising expenses -53.5% -13.2% 35.1% 7.8% -21.4% -25.6% 8.2% 17.2% 43.2% 26.6% -38.% 2.4% -23.4% 12.4% 35.1% ents (excl. company houses) 25.3% 38.7% 21.6% 6.7% 9.7% 11.6% 1.1% 9.2% 14.3% 14.8% 32.4% 13.4% 1.7% 9.7% 14.5% Depreciation (incl. asset retirement) 26.8% 17.8% 12.8% 21.6% 6.2% -1.% 5.9% 9.5% 8.4% 5.4% 22.% 17.3% 2.3% 7.7% 6.8% Lease payments 25.4% 13.3% 13.2% 13.7% 7.6% -6.% -9.1% -6.1% -16.3% -24.8% 18.8% 13.5%.5% -7.7% -2.5% Commission fee 5.3% 25.3% 28.1% 12.3% 3.1% -5.3% 6.% 23.9% 2.4% 5.% 15.5% 19.4% -1.3% 14.9% 12.1% Supplies expenses 4.6% 17.7% 9.5% 2.5% 3.4% 2.7% 17.2% 7.7% 7.2% 4.5% 11.4% 5.7% 3.% 12.2% 5.8% Other 4.4% 26.8% 12.6% 7.6% 1.2% 11.5% 8.4% 11.9% 14.% 1.9% 15.3% 9.9% 1.9% 1.2% 12.3% SG&A ratio 69.2% 63.% 69.% 64.9% 67.1% 62.2% 67.1% 62.2% 67.4% 61.7% 65.7% 66.8% 64.5% 64.5% 64.3% -.1pp Personnel expenses 23.1% 2.6% 23.2% 21.8% 24.% 21.2% 23.2% 21.% 23.6% 21.4% 21.7% 22.4% 22.5% 22.% 22.4% +.4pp Advertising expenses 4.8% 4.3% 5.3% 4.3% 3.8% 3.% 3.8% 3.1% 4.8% 3.5% 4.5% 4.8% 3.3% 3.5% 4.1% +.6pp ents (excl. company houses) 16.5% 15.9% 16.6% 15.7% 16.4% 16.3% 17.% 16.% 16.8% 16.2% 16.1% 16.1% 16.3% 16.5% 16.5% +.pp Depreciation (incl. asset retirement) 5.2% 4.3% 4.8% 4.9% 4.6% 4.5% 4.6% 4.4% 4.3% 4.1% 4.7% 4.9% 4.6% 4.5% 4.2% -.3pp Lease payments 1.8% 1.5% 1.7% 1.6% 1.7% 1.4% 1.4% 1.2% 1.%.8% 1.7% 1.7% 1.5% 1.3%.9% -.4pp Commission fee 6.8% 6.5% 7.1% 6.8% 6.7% 5.9% 6.6% 6.6% 6.9% 6.1% 6.6% 6.9% 6.3% 6.6% 6.5% -.1pp Supplies expenses 3.3% 3.1% 3.% 3.% 2.8% 2.8% 3.1% 2.8% 2.9% 2.5% 3.2% 3.% 2.8% 2.9% 2.7% -.2pp Other 7.7% 6.8% 7.1% 6.8% 7.1% 7.1% 7.3% 7.1% 7.1% 7.% 7.2% 7.% 7.1% 7.2% 7.% -.1pp Source: Shared esearch based on company data SPA Model JINS is applying an SPA (Specialty-store retailer of Private-label Apparel) business model to eyewear retailing (while a misnomer when applied to eyewear, the SPA term is used for convenience throughout this report). While SPA became widespread in apparel retailing, eyewear retailers neither felt the need to use it nor thought it could be possible. In a simplistically presented SPA model, retailers share information with suppliers to make sure the production and store inventory are quickly adjusted to the most recent demand trends. The SPA model is designed to create continuous feedback from the point of sale back through the value chain so that consumer demand is rapidly reflected at the store-front. This requires strong coordination between all the elements of the value chain. Aiming to realize its version of SPA To enable its version of SPA, JINS has an IT system in place providing sales, inventory, and ordering information for each item. This allows learning what sells and what does not in real time. The system also gives reordering signals and helps managing the markdowns. 32/63

33 esearch eport by Shared esearch Inc. The company decides the merchandising strategy during weekly meetings, using a merchandising map that specifies for how long certain products will be sold and at what price. Comparing sales information to the merchandising map allows the company to quickly identify which products aren t selling as expected. Laggard items are marked down automatically to the next lower price point. According to JINS, it is the only eyewear retailer in Japan using an SPA-type 52-week merchandising model while other retailers use a conventional 6-month seasonal ordering cycle. This gives an advantage when it comes to reordering JINS can systematically send more orders for popular items to the suppliers, while the competitors are more likely to incur so called opportunity losses on such items (not having products that consumers want). What faster reaction time means is that to some extent, customers are telling the company what they want instead of retailers making the decisions. One risk of letting consumers drive product decisions is that over time the product offering can become uniform. When certain styles or looks are selling well, the SPA model responds by putting more of the same or similar on store shelves. This has the effect of capturing the momentum of a building trend, but is much less effective when the trend stops. To be effective, SPA retailers need to constantly and carefully balance the mix of products with established popularity (short-term gain but long-term risk) and new items (short-term risk but long-term gain). JINS Store Source: Shared esearch based on company data Stores The majority of JINS stores sell eyewear (349 eyewear stores under the JINS brand as of end ). The remainder of the company s total of 389 domestic stores (4 stores) sell accessories. The typical JINS eyewear store is about 1sqm, located in a shopping center or high traffic area (such as a train station or fashion building). There are eight staff on average (this seemingly large number is partly due to long opening hours of shopping malls but also the fast turnover, high customer traffic nature of stores). The majority of the floor space is for product display. JINS display cases (in its new standard stores) are laid out in a honeycomb fashion, with a separate box space for each pair of glasses. Apart from making the product presentation crisp and product easily accessible, the display method plays an important role in store management. The store staff can easily see which items have sold and need to be replenished on the display. This makes reordering decision making straightforward, fast, and accurate. Additionally, the method is an elegant solution to the problem of inconsistent stocking. The eyewear store managers at JINS and other companies tend to have discretion in ordering, stemming from differences in individual markets where stores operate. However, this often leads to overstocking by managers who badly want to satisfy every customer and feel insecure about not having product. Given that the store performance is normally evaluated based on sales or gross profit amount, not cash-on-cash returns, incentives tend to be heavily skewed toward stocking inefficiency. Paradoxically, not having enough products is also easy to miss just increase the distance between the items as you are trying to arrange them neatly and shortages of particular models go unnoticed. Putting each pair in an individual box space solves this problem and could be one of the key weapons of JINS SPA approach at the store level. 33/63

34 esearch eport by Shared esearch Inc. Store openings/closings Most JINS stores were located in major metropolitan areas. JINS store growth strategy is twofold: to open new stores, and to renovate the existing store network to a new design and layout. The company finalized the new format in early FY8/1 and believes it should substantially increase the store operating efficiency. In FY8/12, JINS opened 45 new JINS-brand stores, 47 in FY8/13, and 67 in FY8/14, for a total of 159 new store openings over the three financial years. Considering the store counts (75) at the end of FY8/1, the pace of store openings was obviously accelerating, but the company limited openings to 2 stores in, 2 in, and 16 in in order to concentrate on improving operations at existing stores. Domestic store count Openings Closures Store count in Japan (right axis) FY8/7 FY8/8 FY8/9 FY8/1 FY8/11 FY8/12 FY8/13 FY8/ China store count Store count in China Source: Shared esearch based on company data QoQ increase FY8/11 FY8/12 FY8/ FY8/ Medium term goal of 5 domestic stores, 1 stores in China JINS aims to increase its domestic store network to 5 and the store network in China to 1 in the medium term, with sales of at least JPY15mn at each store (its current target is sales of JPY1mn at each store). The company reached the 13 store mark in China at end. In Japan, JINS has plenty of room to open new roadside stores and we will be watching closely to see how the company's brand image is aided at these roadside stores. New store assumptions (JPYmn) Size 1sqm Total initial investment 35. Fixed assets 21. Guarantee deposit 1. Inventory 4. Annual sales 13. Operating profit 36. OPM 3% Payback period (incl. tax) 12 months Tax rate 42% Profit after tax 2.9 Depreciation (ten years) 2.1 Operating cash flows (OP - Tax + Depreciation) 23. Source: Shared esearch based on company data In addition to opening new stores, the company is actively refurbishing existing stores. It only refurbished four stores during FY8/11, but refurbished 22 stores in FY8/12, 19 stores in FY8/13, 17 stores in FY8/14, 16 stores in, 17 in, 22 in, and 25 in. 34/63

35 esearch eport by Shared esearch Inc. Product It is fair to say that product development is the critical piece of the company s ambition to dominate the market. JINS must live up to its promise of innovation and high quality at price points below JPY6,. Competitors might be skeptical. JINS counters the skepticism, asserting that high quality can be delivered at unheard of before prices, pointing out that this is exactly what UNIQLO did. Large volume means economies of scale. Lower prices mean high volumes, especially when the product is right. What is required is the desire to take risk in product development, and readiness to change the underlying assumptions about the business. Airframe Source: Shared esearch based on company data Airframe is a line of simple but fashionable looking glasses. The simple and clear message that the company sends is ultra-light and durable, available in many colors. There is no emphasis on price (JPY4,99 with some items offered at JPY3,99). The Airframe has been very successful, and JINS launched the Airframe 6 series in March 212. The approach to lenses is another example. JINS stresses only a few points, no additional charges, thin aspherical lenses standard, and lenses from a top domestic brand. S Inc. understands that in fact up to 85% or so of lenses offered by such competitors as Megane Ichiba (a store brand of Megane Top) are also aspherical, but the competitors feel no need to emphasize that or go 1% aspherical. JINS disagrees. Its position seems to be, Why bother with the other 15%? Make a simple proposition instead we give you only the best and the thinnest lenses, no gimmicks. This approach is probably originating from the company s roots in fashion accessories and could be summarized as KISS (Keep It Simple, Stupid!) and tell (communicate the main benefit). JINS PC Source: Shared esearch based on company data In September 212, the company launched the Airframe i (alpha) range, making these the first models in the Airframe series to be manufactured in Japan. Furthermore, in April 213, the company launched its updated JINS CLASSIC range as part of efforts to expand its customer base. JINS CLASSIC has long been a mainstay of the product lineup, and this renewal added a modern touch to the design. The range aims to consolidate its position as the new basic, with a standard price of JPY7,99 and some models priced at JPY9,99. 35/63

36 esearch eport by Shared esearch Inc. JINS CLASSIC Source: Shared esearch based on company data JINS ability to repeat Airframe success with other innovative products is critical. Potentially interesting areas are prescription sunglasses and its Functional Eyewear series. The company s prescription sunglasses combine high specification UV4 lenses that block 99.% of UV rays with designer frames at low prices. By offering useful features the Functional Eyewear series goes after a new market of consumers who previously did not see glasses as necessary. These features include: reducing eye stress and strain in various environments, eye-protection, and enhancing vision by increasing contrast. JINS Golf and JINS Sports went on sale in July 211 and were followed by the launch of JINS PC in September of the same year. The JINS PC (price: JPY3,99) line has drawn particular market interest; it targets the large number of people who stare at LED displays when using a PC or smartphone, watching TV, or gaming. The glasses cut about 55.% of retina-damaging blue light by using next generation NXT lenses. Product strategy The introduction of some Magnify Life products was delayed relative to initial plans, but was completed in May 215. will be a year in which further polish is added to the lineup of standard and nonstandard products; stock of standard products will be optimized and the lineup will be continuously improved via the PDCA cycle, and ideas for nonstandard products will undergo further refinement while sales trends are closely monitored. Products will be split into eight distinct categories, and the concept of Magnify Life has enabled product creation that meets various lifestyle and functional needs. For non-standard products, it appears that by making a clear distinction between standard and non-standard, the product quality of non-standard products is gaining ground as well. JINS plans to put the non-standard products on the market every season and quarter, as well as on an as-needed basis. We will keep an eye on how the company manages to stimulate the consumers cycle of eyewear buying. Product lineup: By dividing products into eight categories, customers can more easily choose the ideal pair based on functionality and their lifestyles OPTICAL(prescription) NON OPTICAL FOMAL CASUAL SUNGLASSES CLASSIC KIDS & JUNIO EADING SPOTS FUNCTION Source: Shared esearch based on company data 36/63