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I am Takamasa Nagamine, Senior General Manager of the Financial Strategy Unit. Thank you very much for joining us today despite your busy schedule. I will begin by giving an overview of our FY 2025 results and the outlook for FY 2026. In FY 2025, consolidated gross sales increased to JPY 1,290.4 billion and revenue rose to JPY 445 billion. On the other hand, business profit declined 5.4% year-on-year to JPY 50.5 billion due to higher personnel expenses, commissions and the impact of price increases.

Operating profit and profit attributable to owners of parent both decreased partly due to a onetime gain recorded in the previous year. However, profit at each level exceeded the forecast we announced in October. As for shareholder returns, as announced in October, we plan to increase the annual dividend by JPY 2 per share to JPY 54, including the interim dividend.

Next, I will explain our performance by segment. In the department store segment, in loan sales have been showing signs of recovery in the second half but the number of visitors from Mainland China declined significantly starting from December. As a result, inbound sales fell about 15% compared to the previous year when sales outperformed expectations. As for domestic consumption against the backdrop of wealth effect from higher stock prices and other factors, strategies aimed at deepening our retail business also proved effective. Gaisho sales remained strong, mainly driven by higher average spending per customer.

In addition, sales at the official 2025 Osaka Kansai Expo store which was opened through October and other initiatives also contributed. As a result, revenue grew for both the second half and the full year. SG&A expenses, however, increased due to approximately JPY 3 billion in expo related costs as well as higher advertising expenses, outsourcing costs and commissions. As a result, the segment posted higher revenue but lower profit.

In the Shopping Center segment, the positive effects of renovations of key stores such as Shibuya PARCO helped sustain strong performance in both domestic and inbound transaction volume. As a result, business profit increased 9.9%, although a loss related to the decision to close Shizua PARCO was recorded. Both business profit and operating profit increased for the full year.

The Developer business recorded a year-on-year decline in both revenue and profit mainly due to the absence of large scale construction orders and the property sales booked in the previous fiscal year. However, supported by construction orders from both [indiscernible] and outside the group, and a modest increase in rental income, the business achieved the performance level announced in October. The payment and finance segment recorded an increase in revenue, driven by growth in card transaction volume and margin fee income. However, profit declined despite the revenue increase owing to higher upfront costs for acquiring members associated with the launch of the new card.

Next, sales by store at Daimaru Matsuzakaya are shown on Slide 8. While [indiscernible] and other stores with a high proportion of inbound calls posted lower sales, the Nagoya store achieved revenue growth supported by the effect of the renovations to the main building completed in the first half. Please also note that since October, the Umeda store has been reducing sales for area in phases in preparation for a large-scale renovation.

Next, I will explain duty-free sales at Daimaru Matsuzakaya. In the first half, sales declined due to slower sales of luxury brand, partly reflecting exchange rate effect. In the second half, sales showed signs of recovery, but decline in customer numbers caused by worsening Japan, China relations weighed on performance and sales fell again in the fourth quarter. As a result, duty-free sales posted a double-digit decline for the full year.

While sales may fluctuate in the short term due to external factors, our view remains unchanged that inbound demand represents a key market with the potential for steady medium- to long-term growth, supported by an increase in visitors to Japan provided, we continue to strengthen our ability to capture this demand. To stabilize sales from inbound customers, we plan to further enhance our customer development initiatives with a particular focus on visitors from China and other neighboring Asian countries.

SG&A expenses at Daimaru Matsuzakaya department stores are shown on this slide. Compared with the previous year, expenses increased by JPY 2.1 billion, excluding expo related costs. The main factors were higher sales commissions, outsourcing expenses and advertising expenses to strengthen the events at each store. Compared with the October forecast, commissions and advertising expenses increased, but overall, expenses were approximately JPY 0.2 billion lower, broadly in line with plan.

[indiscernible] performance by store is shown on this slide. Throughout the fiscal year, both domestic and inbound business remained strong. and comparable stores posted a 7.9% increase in revenue. Notably, in addition to Sendai and Nagoya PARCO, where renovation effects continued, Shibuya PARCO, which undertook its first large-scale renovation since reopening following its reconstruction in 2019 recorded significant growth from the September reopening onward, driven by renovation effects in areas such as pop culture and fashion.

Next, the consolidated balance sheet is shown on this slide. Interest-bearing liabilities, excluding lease liabilities, decreased by JPY 13.5 billion from the end of the previous fiscal year, and the ratio of equity attributable to owners of parent stood at 36.4%. This page shows the results for consolidated cash flow. Investing cash flow reflected steady execution of business investment, including store renovations. However, due to asset sales and related factors, net cash used in investing activities decreased by JPY 13.1 billion year-on-year.

Next, I will explain the FY 2026 outlook. Please turn to Slide 14. As employment and income conditions continue to improve, we expect personnel consumption to remain firm here as well. Notably, we believe spending by affluent customers will remain strong, supported by wealth effect. As mentioned earlier, our view remains unchanged that inbound demand is a growth market. In the near term, the decline in customer numbers from China is expected to continue but we believe that higher spending per customer resulting from the weaker yen will provide some support.

On the other hand, we recognize the need to closely monitor potential downside risks to consumer sentiment arising from the recent rise in crude oil prices due to turmoil in the Middle East as well as the extent to which changes in the global situation may spill over into the broader economy. At present, however, we believe that many significant uncertainties remain, making it difficult to clearly assess the magnitude of any actual impact. For the time being, we recognize the need to manage our businesses with a particular focus on responding to rising costs.

Based on this business environment, we forecast full year consolidated gross sales to increase 4.4% driven by sales growth in each segment, including department stores and shopping centers with planned business profit of JPY 52 billion, up 2.8% year-on-year. Although the department store segment is expected to post lower profit due to factors such as the impact of innovation, strong performance in the shopping center and developer segments are expected to drive overall profit growth. Meanwhile, operating profit is forecast to decline 4.1% to JPY 47 billion, reflecting costs associated with store closures and other factors. Profit attributable to owners of parent is forecast to increase 2.5% to JPY 29 billion as for the annual dividend, as I will touch on later, we forecast an increase of JPY 2 per share to JPY 56.

The outlook by segment is shown on this slide. In the department store segment, although there will be effects from renovations at the Umeda store and the absence of expo-related sales that we present in the previous year, -- we expect revenue growth through such measures as cultivating customers, including [indiscernible] customers, strengthening off-site events and capturing the effects of renovation carried out in the current and prior years.

For duty-free sales, our basic assumptions based on the current environment is that sales will remain at the same level as the previous fiscal year, while we continue to implement various measures. Although revenue is expected to increase, we forecast a decline in business profit due to higher personnel expenses, system-related costs and other factors. In the shopping center business, business profit is expected to reach a record high of JPY 14.5 billion, supported by increased transaction volumes driven by renovation effect at Shinsaibashi PARCO and Ikebukuro PARCO as well as continued benefits from prior year investments such as Shibuya PARCO.

Meanwhile, operating profit is projected to decline due to costs associated with the closure of Shizuoka PARCO. In the developer segment, we expect higher revenue and profit, supported by revenue growth in 2 business segments: interior construction and facilities as a newly integrated company as well as profit contributions from property sales.

In Payments and finance, we expect higher revenue and profit supported by increased transaction volume from new card members, higher fee income than the decline in upfront costs associated with the issuance of the new card. The outlook for major Daimaru Matsuzakaya stores is shown on this slide. At directly managed stores overall,we expect higher domestic sales,particularly Gaisho as well as contributions from renovation effects. The Shinsaibashi store is expected to post double-digit revenue growth, supported by anniversary event and other initiatives. The Umeda store, however, is expected to see a revenue decline of about 40% due to sales flow closures and construction work related to its large-scale innovation.

Projected SG&A expenses at Daimaru Matsuzakaya are shown on this slide. Expenses are expected to increase year-on-year by JPY 5 billion, excluding expo-related costs. This mainly reflects higher personnel expenses, system-related costs, repair expenses associated with store renovations as well as the impact of higher utility costs. The forecast for the consolidated balance sheet is shown on Slide 21.

As indicated, both assets and interest-bearing liabilities reflect planned levels that include the use of our strategic investment framework for future growth. Next is the forecast for consolidated cash flow. As mentioned earlier, the forecast incorporates the use of the strategic investment framework within both investment and financing cash flows.

Consolidated and segment-level ROIC is shown on Slide 23. While we do not expect to reach the targets set in the medium-term business plan, we will continue working to improve and enhance profitability in each segment from both a short-term and medium- to long-term perspectives. Regarding cash allocation under the current medium-term business plan, which we position as a period of transformation will prioritize investment, including the strategic investments mentioned earlier while also steadily implementing shareholder returns.

The specific details of shareholder returns are shown on Slides 25 and 26. For FY 2026, we forecast an annual dividend of JPY 56 per share, an increase of JPY 2, in line with our dividend policy, marking the sixth consecutive year of dividend increases. In addition, regarding share buybacks, in order to enhance capital efficiency over the medium to long term, optimize equity levels and strengthen shareholder returns we will acquire JPY 10 billion worth of our own shares this fiscal year following the previous 2 years. As a result, the total payout ratio under the current medium-term business plan is expected to be approximately 77%. That concludes my presentation. Thank you very much for your attention.

Good afternoon, everyone. I am Keiichi Ono from [indiscernible]. Thank you very much for taking the time to join us today. I would like to speak about our medium-term perspective. First is the progress of our medium-term business plan. On Slide 29, as we have explained many times before, our group has defined its future vision to become a value co-creation retailer. We have been advancing initiatives aligned with this vision using the 3-3-1 framework. Since this has been presented on several occasions, I will not go into detail today. .

Within this framework, we have identified 2 major pillars for our growth strategy for becoming a value co-creation retailer extending beyond 2030. The first is deepening retail operations, including expanding our customer base, enhancing the appeal of customer touch points and strengthening our content offerings. The second is evolving group synergies. As outlined in the second 3 of the 3-3-1 framework, we are further advancing group synergies along 3 axes: customers, areas and content.

While the time line for these initiatives differ, we are steadily pursuing them to achieve sustainable growth over the long term. Our financial outlook has already been explained. Looking back in FY 2023, the final year of the previous medium-term business plan, prior to the launch of the current plan, we focused on achieving a full recovery from the COVID-19 pandemic. At that time, consolidated operating profit stood at JPY 44.3 billion. For FY 2026, our outlook calls for consolidated operating profit of JPY 52 billion. While this represents steady growth, it falls short of the revised final year target of JPY 56 billion announced in April of last year.

Given this situation, business conditions vary across the group. While our shopping center and developer segments are performing strongly, the department store and the payments and finance segments continue to face challenges. This disparity underlies the current outlook. The next point is something I touched on 6 months ago. From my perspective, this medium-term business plan is centered on transformation. And I would like to briefly discuss the progress we have made and the challenges that remain.

First, we view our progress and results through 3 main [indiscernible] and the scenes have not changed significantly. However, as we have made progress on our initiatives, I would like to discuss the first point, which is expanding the potential of our stores and areas. This involves enhancing the appeal and the profitability of our stores. As a result of major renovations at our flagship stores, [indiscernible] profit volume has grown significantly, reaching record high levels. From a group perspective, I believe PARCO has clearly raised the bar in terms of its contribution to process.

Next, we are strengthening our presence in key areas. Our new commercial facility, [indiscernible], in Nagoya, will finally open in June this year. We will maximize the impact of this project and have also acquired a new property in Kobe as recently announced. Together with our ongoing projects in Osaka and Fukuoka, we believe the group's growth potential in each of these areas is increasing significantly. The second point is the expansion of the group's customer base. As I mentioned earlier, we have completed the consolidation of our various credit cards within the group.

And it has been about 1 year since the launch of the new card. Over the past year, we have seen significant progress in terms of rejuvenating our customer base, and I will discuss this in more detail later. Furthermore, regarding the progress and the conversion into IG-based customers, we are deepening our engagement with high net worth individuals, primarily through our gaisho sales efforts. Additionally, regarding overseas inbound CRM, the number of customers has expanded beyond our expectations.

The third point is new business, which we refer to as the promotion of high-efficiency business. Currently, one of our group's management challenges is capital efficiency. Therefore, we use this phasing to emphasize our focus on management efficiency in our new ventures. First, we are venturing into the content retail business. As previously mentioned, we have completed the implementation of content such as merchandising, intellectual property and services. And we are now in the process of launching the business.

Next is the integration and the reorganization of our interior construction and building management businesses. As we mentioned at last year's IR business strategy presentation, this business has exceptionally high capital efficiency within our group with ROIC, hovering in the mid-teen range. We have now established the foundation to further expand this profit scale. Furthermore, we are launching a commercial facility value enhancement business. Specifically, we have made a partial investment in [indiscernible] in the of Yokohama. -- and have been commissioned to serve as its commercial adviser. The external environment is changing significantly, specifically given the selling of construction costs and the rising inflation, we recognize that it will be difficult for our group to continue acquiring land and initiating redevelopment projects. Therefore, we believe it is necessary to shift our development business strategy towards reliably and efficiently generating management fees.

Now shifting the topic to the remaining challenges. We faced 2 main ones. First, we recognize that we have not yet fully realized the group's collective strength. Conversely, I believe this is where we have the most room for growth. As I have often mentioned, I believe I have established a very close working relationship with President [indiscernible] and the President [indiscernible], who are here today. However, when we look at the organization at various levels, we still see instances where we have not fully overcome the silo mentality.

This may be hindering the speed of collaboration across businesses. By taking proactive measures here, we can further accelerate the group's overall pace of initiatives. Next is the delay in driving transformation within our specialized business areas. As I mentioned 6 months ago, we still need to catch up [indiscernible] expanding their business portfolio through M&A and accelerating our IT and digitalization initiatives. Based on these challenges, we have significantly revamped our management structure starting this March, although this remains an initial response.

The most significant change is that to further strengthen collaboration amongst the holding company, JFR, Daimaru Matsuzakaya department stores and PARCO, the top executives responsible for HR, finance and IT digital have been assigned to concurrent roles.

These individuals were originally senior executives at JFR and now oversee both Daimaru Matsuzakaya and PARCO. Furthermore, we have recruited external talent to lead specialized business areas such as IT, digital and business development. In addition, while we described this as a move to strengthen our response to changes in the business environment, we have reshuffled the membership of the department store management team to revitalize it. The person has recently assumed the role of Head of the Management Strategy Unit at Daimaru Matsuzakaya previously served as the Head of PARCO's Management Strategy Unit.

Furthermore, for the first time to my knowledge, we have appointed a store manager with a corporate background to one of Daimaru Matsuzakaya flagship stores. This individual comes from Oriental launch and we hope we will bring a fresh perspective to store management. We are actively pursuing these initiatives. Among these initiatives are our plans for 2026. First, with this fiscal year marking the final year of our medium-term business plan, it is essential that we firmly established the foundation for the lead forward we aim to achieve beginning next year.

As we approach the final year of the medium-term business plan, we have repeatedly emphasized internally that this fiscal year is about tracking a balance between 2 key elements: financial performance and the transformation process itself, which has been central to driving future growth under this plan. As the culmination of the current medium-term business plan, see Page 37, we believe our group customer strategy has made significant progress. In terms of expanding our domestic and overseas customer bases, our first priority is to drive customer acquisition through our Gaisho sales operations.

In addition to capturing the growing number of young affluent consumers, we are also focusing on developing untapped markets. By untapped markets, I mean prefectures where depending on the area, there are no longer any department stores or luxury brand shops. We plan to use our nationwide store network as a base to expand the reach across these broader areas. Regarding inbound CRM, we have already surpassed 2,000 customers and are beginning to see results in encouraging repeat visits. While the transaction volume of inbound sales and its share of total duty-free sales are still small, truly minimal, we believe this area will certainly yield results in the future.

Furthermore, we are expanding the network of [indiscernible] partner merchants for the GFR card. We have been working on this for some time, and the number of stores have now reached approximately 750. These stores play a crucial role in connecting our main hubs with local shops within each region. We aim to reach 1,000 stores in the near future. As a result of these initiatives, we aim to increase the group's total number of ID-based customers to over 6 million by fiscal year 2026.

Next, while we use the term CRM to refer to the system that connects our diverse customer touch points and platforms, I would like to focus my remarks here on the theme of rejuvenating our customer base. About 1 year ago, we transitioned the issuance and the management of the Pope cards from an external card company to JFR Card within the group, and we have been issuing the card under this framework since then. As a result, as shown in the pie chart on the right, ID-based customers in the 2040 collectively account for approximately 1/3 of our department store customers.

In contrast, at PARCO, customers in their 20s alone make up 30%. When combined with those in the 30s or 40s, we have once again confirmed that 2/3 of our total customer base consists of customers in the 20s through 40s. Here in this, some of you may assume that PARCO's average spending per customer is lower than that of department stores. However, the data is shown on the lower right indicates that that at the 6 PARCO stores in Central Tokyo, including [indiscernible], customers with active PARCO card accounts spend annually about 1.5x more than Daimaru Matsuzakaya card customers, excluding special sales.

Accordingly, we do it as highly positive but we're beginning to establish solid connections with younger customers who demonstrate strong spending appetite despite their age. While the aging of the customer base has long been a shared challenge for department stores, the presence of pulp within the group clearly allows us to address and counter this challenge. From this perspective, as a domestic retailer focused on the upside market, we believe our customer democrats are more sustainable than those of any other retailer.

To further leverage this advantage, we will introduce a points exchange program between our department stores and PARCO in fiscal year 2027. This is our key area strategy. HAERA, which I mentioned earlier, will open in Nagoya Sakae District this June. Since PARCO is scheduled to be introduced into the south wing of Matsuzakaya Nagoya in 2027, the projects for completion will come as we enter FY 2027. Even so, we intend to firmly begin the harvesting phase from this fiscal year.

Regarding the [indiscernible] area in Fukuoka then the South wing in Shinsaibashi Osaka -- we plan to firmly establish the direction of our major plans within this fiscal year. We also intend to actively promote collaboration within the area in COVID, as mentioned earlier.

Next is the ownership and development of content. As previously explained, we have been advancing our initiatives across 3 areas: merchandising, IP and services. To be candid, we still have a long way to go before these business areas make a meaningful contribution to profits. We are truly just getting started. For at least the next year or my focus will not be on profit generation. Instead, our priority is to prepare each business for future growth and in some cases, to assess its longer-term potential. Furthermore, over the next year.

We plan to focus intensively on expanding the breadth over a content portfolio. This may include M&A and additional external partnerships. Meanwhile, in FY 2026, we will revise our future version and begin formulating our next medium-term business plan. As a current management challenge, we recognize the need to shift towards a more resilient business structure. Achieving sustainable growth and improved return on equity will be essential.

To that end, the first step is to strengthen the profitability of our core businesses with a particular focus on further improving the profitability of Daimaru Matsuzakaya. In addition, by maximizing the value of our regional assets and expanding our business portfolio, we aim to achieve a return on equity of 10% or higher at an early stage. We will proceed with the revision of our future vision and the formulation of the medium-term business plan, incorporating these objectives. Our assessment of each management issue is as outlined today. Taking these factors into account, we plan to present the overall direction and the key elements of our proposed solutions at forums such as this in the autumn of this year approximately 6 months from now.

That concludes my remarks.

This is Kaza haya from UBS Securities. I have 2 questions. The first regards the financial figures and the second concerned strategy. Regarding the first point, in your plans for the developer business this fiscal year, you mentioned an increase in profits due to property sales. Could you please specify the exact figures you are projecting for this? Also, regarding the budget for adjustments, as was the case in the previous fiscal year, you have included a year-on-year decrease of JPY 1.6 billion in business profit. Could you explain the reason behind this? That is my first question regarding the financial figures.

I'll take that question. Property sales in the developer business are currently projected at about JPY 4 billion. Although market and missions remain full. This is our current plan. As for the adjustment amount, the FY 2025 figure included costs set aside for potential M&A that were ultimately not used, along with reductions in holding company expenses as discussed during the third quarter earnings call.

One factor here involves internal transactions, specifically with HAERA becoming fully operational. There will be internal rent transfers taking place. That is 1 aspect. Additionally, while we'll strive to contain expenses at the holding company, we anticipate a slight increase in certain areas. Consequently, we project a net adjustment amount of minus JPY 4.8 billion.

In that case, should we understand that this does not include any one-off strategic investment costs at this time?

Yes. This is business as usual.

My second question is more general. As President Ono mentioned at the beginning. The situation in the Middle East remains quite uncertain. President Ono on, are you currently conducting any simulations regarding what might happen to the department store industry or specifically to Daimaru Matsuzakaya and PARCO if the situation in the Middle East as on.

Currently, the environment makes simulation extremely difficult. It is also challenging to determine the appropriate timing for such simulations. Therefore, we have not actually calculated specific figures regarding the potential impact this might have. I think there's a high likelihood that inflation will be further fueled. However, when it comes to the business of department stores like Daimaru Matsuzakaya, including PARCO, our core business involves luxury goods. So we generally carry few daily necessities.

Within that context, the area most likely to be affected would be food, particularly fresh food. I have been chatting the numbers closely since we entered this inflationary phase. But so far, there has been virtually no impact. Therefore, if this trend continues, it seems unlikely that there will be a significant impact on our top line.

The other aspect is cost there is a possibility that increases in utilities and other expenses, including energy costs, may materialize with a lag of several months due to rising crude oil prices Therefore, we will continue to monitor the situation closely. There are several contingency plans in place for cost management in such scenarios, we have no choice but to manage the situation so that any impact remains within our expectations. As for PARCO, given the differences in business models, Telco's model clearly makes it easier to absorb costs compared to Daimaru Matsuzakaya. Therefore, we are not particularly concerned about this aspect.

This is Takahashi from Mizuho Securities. I'm truly sorry I couldn't make it to the venue I have 1 question for President Ono. I apologize for always asking a similar question, but earlier you provided a view of progress to date and explain various challenges. Two years have passed since you took office and the external environment has changed dramatically during that time. setting aside those external factors, I'd like you to summarize what you feel has been the most tangible achievement over these past 2 years.

As you mentioned earlier, there appears to be discussions, particularly at the management level that increasingly move beyond the boundaries of PARCO or Daimaru as individual brands. focusing instead on areas such as content. At the same time, you also noted the need to further expand such collaboration across the broader organization. Looking back over these past 2 years, what would you say are the areas that remain unfinished or where you feel more should have been accomplished assume that precisely the direction of the policy starting this year. I would appreciate your thoughts on that.

Mr. Takahashi. I believe I touched on this somewhat in my presentation today. But to elaborate further, and this might sound a bit contradictory. The area where I feel the most positive momentum is integration within the group. Please understand that I also cite this as a challenge precisely because I believe we can still go further with that integration. We have seen the decline in the sense of belonging to a specific company or background.

And instead, there is a growing tendency to leverage the unique characteristics of each business to explore how they can be utilized across the group. I have the impression that such cross-functional thinking is increasingly taking place. particularly notable initiatives, personnel exchanges at the store manager level between Daimaru Matsuzakaya and PARCO, although they are called personnel exchange. When I informed someone of a transfer, I tell them, there's no guarantee you'll go back to where you came from. You are core talent for the group. So there is no telling where you may go.

In that sense, a store manager who joined Daimaru Matsuzakaya from PARCO believed it would be interesting to explore new ways of utilizing Gaisho and has since been creating practical examples of driving sales through the sales force in ways we had never seen before. Without going into details, I believe these developments clearly represent some things that would have been unthinkable within our group until around 2020. And I see them as both a catalyst and the foundation for future growth.

So as I mentioned earlier, if I were to single out one remaining challenge, it lies even further down the organization, have been encouraging general managers on an ongoing basis. And I believe that if they and the layers below them could collaborate more openly across the boundaries of the company units and organizational structures, we will become even stronger. Sorry for the long answer, but that is all. Understood.

This is Shigeoka from Daiwa Securities. I apologize for joining online I have 3 questions. The first one regards the department store business. While the situation in the Middle East has had an impact on products for affluent customers in Japan, I get the sense that the wealth effect has not significantly eroded and consumption remains relatively robust. You've outlined your strategy on Page 37 of the materials. Could you tell us what you consider to be the most important points for further capturing the affluent market going forward? And where you see the greatest potential for growth.

Thank you, Shigeoka-san. I'll take this question. As you pointed out, the third and the stock market has boosted asset values and the average spend per customer has also risen significantly. Furthermore, with the growing number of young affluent consumers, we are also seeing the positive impact of the demographic within our company. Based on the analysis, we are focusing on the idea that profitability will naturally grow over time if we can increase the number of high spending customers who generate a significant share of our top line revenues to achieve this growth we first need to increase the overall number of customers we serve.

In other words, since the number of top-tier customers want to increase overnight, we need to increase the number of customers in the tier below them, and we believe there is room for growth here. To that end, this year's initiative to increase customer numbers as President Ono explained earlier, include expanding our gaisho sales territory and enhancing engagement with customers who do not yet rank among the top standards. In other words, to increase the average spend per customer, we plan to take various actions such as inviting customers to special events and promotions. We believe that customers are increasingly seeking more than just products but also broader customer experience.

We haven't yet been able to fully leverage our potential in this area. So we see considerable room for growth. To capitalize on this we are committed to strengthening customer touch points and enhancing the customer experience beyond shopping itself. We also plan to invest in these areas to drive top line growth. This is how we view the growth potential of Gasiho sales.

I see. So is it correct to understand that overall, there is still room for growth in both customer numbers and average spending per customer, although there are various stages involved?

Yes, at this stage, that is correct.

Thank you. My second question concerns PARCO and hthe shopping center business. I understand that operating profit declined due to losses associated with the closure of Shizuoka PARCO, but business profit is also only up slightly compared with the momentum you have shown so far that appears somewhat conservative. Could you please elaborate on the background?

This is [indiscernible] from PARCO. For FY 2026, we expect increases in several expenses. These include depreciation, maintenance costs, personnel costs and IT-related costs. One factor is that we expect preopening costs to be incurred within PARCO on a stand-alone basis for facilities scheduled to open in 2027. In addition, while the average age of our buildings is 36 years, we anticipate not only maintenance costs that grew over time, but also significant costs associated with major repairs, an increase in personnel expenses is also factored in.

As a result, SG&A expenses are expected to rise, and this is reflected in a somewhat conservative outlook for business profit. That is the background.

Thank you. As usual, if sales come in a bit stronger than planned and things proceed smoothly, would it be fair to say there is potential for some upside? Of course, I understand there are various factors to consider such as the situation in the Middle East and rising costs. But would you say the overall outlook is being kept conservative?

Yes, we believe we must avoid underestimating costs. So it is fine to understand that our cost assumptions are conservative.

My final question concerns the approach to SG&A expenses when viewed on a consolidated group basis. You mentioned earlier that this is a phase of upfront investments. but their head office-related expenses and costs associated with new businesses such as those seen in FY 2025, reflected in consolidated SG&A expenses. You also touched on this in the adjustment amount, but I would appreciate some clarification.

[indiscernible] . I will answer your question. Regarding SG&A expenses, last fiscal year, we had some investment projects on the horizon. So we incorporated them on an ad hoc basis. For this fiscal year, there are 2 projects we are continuing to pursue, although we cannot yet disclose the details. However, our approach is to recognize SG&A expenses as specific projects come more complete Accordingly, SG&A for FY 2026 is based on normal operating costs, together with cost increases, reflecting inflationary factors, including the rising price of crude.

Thank you very much. Are there any areas within the adjustment amount where you have built in a buffer?

If anything, you can view it as including some rounding adjustments resulting from the consolidation process.

This is Yamaoka joining online from Nomura Securities. I have 2 questions. First, I would like to confirm your thoughts about gross sales in this year's plan for the department store business. Regarding the duty-free sales and inbound demand, you mentioned earlier that they are expected to remain broadly unchanged year-on-year. For clarity, could you please break this down between inbound and non inbound segments and confirm the approximate growth rates you are assuming for each in [indiscernible]. Also, would you elaborate on how you forecast inbound business? That is my first question. Thank you.

This is [indiscernible]. I will take your question. First, regarding our forecast for gross sales this fiscal year, we are seeing a decline due to 2 factors: the absence of sales from the Osaka-Kansai Expo official store, which we had last year, as well as the effect of the closure of the Umeda store, as mentioned earlier. Broadly speaking, these 2 factors are the main drivers of the decline in revenue against the backdrop but plan assumes strong growth in special sales, a slight decline in domestic sales and inbound sales remaining flat year-on-year.

Regarding your question about inbound amount, the yen has recently weakened significantly. However, our forecast assumes a U.S. dollar yen exchange rate set at a lower level than the current market rate. Based on unit spending levels under this assumption, we expect the number of Chinese visitors to remain on the declining trend through around October. On

the other hand, compared to last year, we are assuming a higher average spend per customer as we expect the current weak environment should persist as a result the projects that overall inbound sales will be roughly on par with the previous year. That said, we will have a buffer as we have various initiatives planned and therefore believe there is a room for growth.

My second question concerns the period beyond the current medium-term plan, specifically the next fiscal year and beyond, while there are various factors at play, profits did not increase significantly last year and may remain at the same level this year. Among the measures you explained earlier, many of the development-related initiatives, a future have longer lead times. Looking ahead to the third of the new medium-term business plan next fiscal year, should we expect that these elements will make meaningful contributions to improvements from the very first year of the plan? Given that achieving ROE of 10% or higher is a virtually high hurdle, should we anticipate a strong start towards that goal or is it still further down the road?

I'm asking this question in the hope of gaining some insight into the trajectory you envision for the next medium-term business plan and perhaps some color on the key drivers behind it.

I think it will be best to provide a thorough explanation in October and next April. To be honest, a great deal has changed over the 3-year period of the current medium-term business plan. We set our final year targets in the first year, but we each time revised them upwards. The situation changed again, and this pattern has repeated itself. So I think it will be premature at this stage to say definitively whether next year will be strong or remain challenging.

In that sense, we want to focus on the performance for FY 2026 and ensure we develop a solid foundation for the future. So I would appreciate your patience until we can provide a clear picture in 6 months to 1 year.

This is Kanamori from Nikko Securities. I have 3 questions, but please feel free to give brief answers due to time concerns. First, on Slide 22, in the cash flow plan section, you mentioned that you're puncturing a JPY 60 billion for strategic investment. However, based on the discussion so far, I understand that the impact on the income statement is reflected in neither the adjustment items more in the SG&A expenses. So this means that the impact in reflected only in cash flow plan and not in other items?

Yes. At this stage, we have structured reception that way.

I see. So in case of an M&A, we can assume that some costs would be encouraged, but the specifics are unknown. Is that correct?

That's right. Since it is difficult to estimate at this point, we haven't specifically allocated a fixed amount.

Understood. My second question concerns the system-related expenses in the department store business. But this is mainly maintenance costs? Or are they for adding new capabilities to systems such as new CRM functions to enable future initiatives? If it involves I think new functions or capabilities, could you please explain what the specific functions they entail and when they are expected to be implemented?

Thank you for your question. This is [indiscernible]. I will respond. Both aspects are included. There are cost associated with replacing equipment for years ago such as tablets. As they reach the end of their life cycle, and there are also upfront system investments for initiatives we plan to undertake in the future by leveraging data. Some of these costs are projected to be included in FY 2027 and beyond.

This is Ono. To add a little more context, we have a core system replacement coming up. A part of that is set to begin in 2026. So while it will involve some investments, I believe we are getting closer to a point where we can take quite bold initiatives.

Finally, I have a question for President Ono. You mentioned that one challenge is that the group has not yet fully realized its collective strength that there remains room for growth. However, I have the impression that this has been an ongoing challenge for your company for quite some time. You mentioned that this challenge has not yet been fully overcome. The company has already pursued initiatives such as internal personnel exchanges and hiring external talent. My question is whether accelerating the pace or scale of these efforts would be sufficient to resolve the issue? In other words, would expanding the number of internal rotations or external highest be effective? Or is the underlying issue more about corporate culture or organizational mindset in the sense that progress in this area has still been somewhat limited. A brief answer is fine.

I believe that at least until the current structure was established, we have only engaged with this area to a very limited extent. We brought telco into the group in 2012. And if I recall correctly, maybe our wholly owned subsidiary at the end of fiscal 2019. However, what will generally be described as PMI was, in my view, not intentionally carried out at the time. In essence, we used to view PARCO as having its own distinct strength. And now we have entered the phase of exploring ways we can work together as a group. That said, this effort has effectively only been underway for about 2 years. They are very pleased to improve this, such as through talent strategy, listen enhancement and a more concrete efforts to foster a shared mindset. So I think we just have to move forward while exploring these options.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Thank you all for joining us despite your busy schedules. I'm Inagami, and today, we'll have 3 speakers presenting various topics. For this IR Day, we aim to share insights into the future vision of our group as we work toward becoming a value co-creation retailer. Specifically, we will introduce our initiatives around business, human resources and group synergies, which aim to foster a one team approach. Additionally, we will address key investor concerns, including the current state and the challenges of our company from the perspective of external directors. First, we will begin with the growth strategy tied to the integration of our businesses for interior design and facility services. Allow me to welcome Mr. Yoshimura, the current President of J. Front Design & Construction, who is also slated to head the new integrated company. Mr. Yoshimura, the floor is yours.

Hello, everyone. I'm Yoshimura from J. Front Design & Construction. Thank you for joining us today. As was just mentioned, we will launch a new company called J. Front Prime Space in March. I would like to take this opportunity to provide an overview of the company and explain its future direction. This is the agenda. I'll proceed with an overview of our company and explain its strategic direction. This is the company overview. The new company's name will be J. Front Prime Space or JFPS, and I will lead it myself.

The company was established last September, but the business will launch this March. JFPS will be a wholly owned subsidiary of J. Front Retailing, placing it within a holding company framework. The total number of employees will be just over 1,200. For reference, I lead J. Front Design & Construction, which has approximately 300 employees. Meanwhile, PARCO Space Systems has around 900 employees. So combined, we have just over 1,200 employees. We will locate our headquarters in Shiodome, Tokyo, supported by roughly 50 regional facilities. These facilities span major locations at Daimaru Matsuzakaya Department Stores and PARCO stores. In addition, within the current PARCO Space Systems, we handle various businesses, including hotel cleaning. While these are smaller sites, their presence in each hotel brings our total to 50 sites.

Next is our history. As many of you know, our business originated as department stores, the top red and green sections represent the lineage of Matsuzakaya Department Store and Daimaru Department Store, which together have a history of about 100 years from their founding. Starting from here, each department store had a building and interior design department formerly called Furniture Decoration, such departments existed at both Matsuzakaya and Daimaru.

Taking advantage of the department store merger, we established J. Front Design & Construction in 2008. Meanwhile, within the PARCO Group, formerly Seibu, there was a company called Nishida-Denko, which had been in business for nearly 60 years. In 2000, they founded Parco Space Systems. Now the interior design companies operating within these diverse department stores and shopping centers will merge to form JFPS.

Next slide, please. This page outlines our business operations. J. Front Design & Construction specializes in interior construction and design, while PARCO operates under the name Space Systems, both focused on interior work and related fields.

While our core business is interior projects, the upcoming merger will allow us to operate with 2 major pillars, interior design and facility services is shown on the right-hand side of this slide. Regarding interior design, we handle both prime contracting and subcontracting. For prime contracting, we receive work directly from developers and hotel operators. Subcontracting comes from general contractors, often involving electrical and telecommunication installations.

Later, I will provide specific examples of our work, but to summarize, we handle everything from design and planning to construction and implementation, covering the entire end-to-end process. Additionally, J. Front Design & Construction operates a furniture manufacturing factory in Niyagawa, Osaka. This furniture factory specializes in custom fixtures for high-end luxury brands, and we are recognized as a designated factory for premium goods.

Another segment of interior design is our Refex business, primarily catering to B2C customers. Refex specializes in shatterproof mirrors, which are lightweight, durable and versatile for disaster preparedness. These mirrors can also be used in ceilings and other installations. Some of you may remember this product from the old TV show, the Best 10, where the mirror gate seen in the background was this type of mirror.

The facility services, which are currently managed by PARCO Space Systems focus on facility, building and property management. This encompasses facility operations, maintenance and enhancing asset value. Currently, this division oversees operations for Daimaru Matsuzakaya Department Stores and PARCO properties. To summarize, following the merger, we will operate with 2 major business areas, interior design and facilities services.

Please turn to the next page. For your reference, we have included clear examples. J. Front Design & Construction currently deals with many luxury hotels. We also work in hotel interior design and have experience with department stores like Matsuzakaya and Daimaru, PARCO locations and various commercial facilities.

Additionally, we work on unique projects such as vehicle interiors. Those of you in the Kansai region may be familiar with the interior design of the luxury train Twilight Express Mizukaze. We also have experience with the Diamond Princess Cruise ship, which gained attention during the COVID-19 pandemic. These diverse projects are distinctive strengths that sets us apart from competitors. Recently, we've seen a significant increase in projects for luxury brands driven in part by the growth of inbound tourism.

We've undertaken numerous new construction and renovation projects, including the interior design of the Tiffany Tower in Ginza. Please turn to the next page. This covers the performance trend. As shown on the slide, our business has been steadily growing year-by-year. We have broken down the figures for J. Front Design & Construction and PARCO Space Systems while also including the combined total.

Our performance is currently benefiting from the inbound tourism trend, which has driven significant construction activity for luxury hotels. Additionally, as I mentioned earlier, luxury brands are experiencing strong growth, which has created favorable momentum, further boosting our performance. One note of explanation is that the slight increase in FY 2024 was primarily due to major renovation work at the Nagoya Department Store under the Daimaru Matsuzakaya Group. Excluding this factor, the trend is a steady upward trajectory.

Please turn to the next page. This shows our position within the industry. As you can see, the far left column list figures for J. Front Design & Construction, PARCO Space Systems and J. Front Prime Space, the new integrated company launching in March. In brief, the sales are approximately JPY 73 billion with a business profit of JPY 4.3 billion and an operating profit of JPY 4.3 billion.

Within the industry, as you know, Nomura ranks first, followed by Tanseisha in second place. Currently, the third ranked company is Space, which also specializes in interior design. While this is a simple aggregation, we believe we hold a position around third place within the industry.

Please turn to the next page. Since we operate under the J. Front Retailing Group, we categorize our work as internal and external. Internal work refers to projects commissioned by Daimaru Matsuzakaya Department Stores and PARCO, while external work involves projects from various clients, including hotels, luxury brands and other entities outside the group. In the current J. Front Design & Construction operations, approximately 70% to 80% of our orders come from external clients.

Similarly, at PARCO Space Systems, about 80% of the interior-related construction projects are sourced externally, while the remaining work comes from internal clients. Although we do handle a significant portion of internal projects, our revenue is primarily driven by external work contributing to consistent growth and profitability.

For your reference, we've included ROIC figures on the next page as they've been discussed recently. For both J. Front Design & Construction and PARCO Space, people represent the largest investment component. Consequently, their ROIC figures are higher compared to other companies. And even within the group, J. Front Design & Construction shows 27%, while PARCO Space shows 14%. So far in my presentation, I've explained our company overview. Next, I'll outline our strategic direction. This page details our mission and vision.

Our mission: Bringing passion to life. Together, toward the future embodies our commitment to craftsmanship and facility management. These areas are significant as they create spaces where people live, work and stay. This includes our customers, partner companies and of course, ourselves. Our commitment is to bring these passions to life and carry them forward into the future.

Our vision, specialists at the intersection of spatial value and sustainable value, focuses on 2 core aspects. Regarding the spatial value we've been discussing, this refers to how we continuously enhance and elevate the quality of the spaces we create. In terms of sustainability, it means maintaining and managing facilities and ensuring their ongoing value and continuity. Our guiding principles listed on the slide highlight our principles and approach.

I'd like to highlight the point at the very bottom, which we've underlined for emphasis. Be a company where people can work with confidence and peace of mind. We recognize this as the foundation for recruiting and developing young talent in today's environment. This is why it's included as guiding principle. The details are outlined in the slide. Given time constraints, I would appreciate it if you review them on your own.

This shows our businesses and the value chain within the group. On the far left is the real estate business operated by J. Front City Development. Within the value chain, this covers the real estate function from initial marketing to building construction. The current J. Front Design & construction is shown within the red frame. This involves everything from design and planning to construction and on-site execution as well as maintenance. For department stores and commercial facilities, it also provides interior supervision overseeing the environment when tenants move in.

Now PARCO Space Systems overlaps with the red framed area, but also extends into the blue sections on the right and bottom. The company specializes in facility management and equipment-related work, notably electrical installations. By integrating and expanding these capabilities under the new company, J. Front Prime Space, the value chain will expand. I hope you understand this diagram is illustrating how the expanded value chain will support further business growth.

The new company will officially launch in FY 2026, and this slide outlines the outlook for our market environment. Fundamentally, the market remains robust, particularly in Tokyo, where many cranes are visible and buildings continue to rise. In the luxury brand segment as well, certain brands are still actively investing in new projects. However, labor shortages are truly significant across all industries, not just ours.

The challenge is how to secure and retain talent while continuing to win new projects. Additionally, the construction industry is facing soaring material costs and labor wages, which, in some cases, have doubled construction investment costs and even led to project cancellations. These factors are significant concern for the future. As for the building maintenance and facility management business, we anticipate solid growth in demand for maintenance and operational management as more buildings are completed. However, labor shortages are an issue here as well.

While the number of foreign workers has increased in recent years, retention and various other requirements remain key challenges. Securing talent will be critical for future growth. The number of companies in this space is limited and few can employ significant workforce. Therefore, we intend to firmly position ourselves within this field. This outlines the basic policy of our growth strategy.

As I mentioned earlier, we excel in creating high-quality spaces in the luxury brand and the hotel segments. By combining the expertise of J. Front Design & Construction, spanning design and planning with PARCO Space Systems, specializing in operational management, we will offer a one-stop solution. To the best of my knowledge, there are very few companies in the market that can deliver end-to-end services like this.

Our goal is to establish ourselves as a unique and unmatched company. The specific policies are outlined in the lower section of the slide. For interior and facility businesses, we prioritize leveraging our design and technical capabilities while maintaining strong relationships with developers and other clients. By delivering high-quality results on site, we secure repeat businesses. We intend to continue growing the cycle.

In the facility business, our current portfolio consists largely of PARCO and Daimaru Matsuzakaya properties. Naturally, we have accumulated expertise there. Through Prime Space, we plan to broaden our base and into external facility operations beyond the group.

Next, the strength and industry positioning of our interior business. As noted earlier, we specialize in high-quality interior construction, which sets us apart from other companies. With the addition of facility operations, we have described our positioning as shown on the slide. Companies such as Nomura and Tanseisha focus extensively on exhibitions and events, giving them a very broad market scope. Meanwhile, our competitors in interior construction are department store affiliated firms, namely Takashimaya Space Creates of Takashimaya and Isetan Mitsukoshi Property Design of Isetan Mitsukoshi.

In the department store interior sector, these 3 companies are generally the main competitors. While we compete in the high-quality interior segment, the new company will broaden the scope. PARCO Space Systems brings expertise in the middle volume type segment and also handles commercial facilities and digital signage. As indicated by the diagonal dotted line, our market positioning will cover these areas.

Our aim is not to pursue the same domains as Nomura or Tanseisha. Rather, we plan to steadily expand the areas where we are strong. Finally, this is our vision for 2030. With the establishment of Prime Space in March 2026, we aim to achieve sustained business growth towards 2030, increasing both revenue and profitability. However, as mentioned earlier, we face various challenges, including labor shortages.

By pursuing measures such as M&A and business alliances and with the ambition to surpass companies such as Nomura and Tanseisha in the industry, we will strive to move to a higher level. The final page contains appendices, including industry market trends and related information. Please feel free to read them at your convenience. This concludes my presentation. Thank you very much.

Next, following on last year's IR Day discussions on group talent strategy, we will focus today on a unique initiative within our company, value co-creation through talent exchange. I will now invite Mr. Kobayashi, who is originally from PARCO and currently working at GINZA SIX to give the presentation. Mr. Kobayashi, please.

I'm Akio Kobayashi from Ginza SIX Retail Management. Thank you for joining us today. As Inagami-san said, I am currently seconded from PARCO and work at GINZA SIX. In today's presentation, I will explain how diverse talent exchanges are taking place at Ginza Six among people within the group as well as with external partners.

I would like to share concrete examples to illustrate what kind of value these exchanges are creating. Let's turn to the slides. First, I'd like to briefly introduce my background. I joined PARCO after graduating from university. As noted in the slide, I have worked in a wide range of areas, including developing promotional strategies for all of our stores, corporate branding, large-scale renovations and rebranding for existing PARCO stores and overseeing new store opening projects under PARCO's expansion strategy.

Later in 2024, I was seconded to GINZA SIX Retail Management, and I am now in my third year. At GINZA SIX, I belong to the Promotion & Services Department, where I am responsible for initiatives related to creating customer experience value.

Moving on to the next slide. I'd like to provide a brief overview of GINZA SIX Retail Management, the company where I'm currently assigned. As many of you may already know, I would like to briefly explain GINZA SIX once again. On the left, you can see GINZA SIX, including its exterior located in Ginza 6-chome. The facility opened in 2017 as the largest mixed-use complex in Ginza. The concept of this commercial facility is Life At Its Best. This concept is reflected in the facilities' offerings.

Visitors enjoy exceptional brands and products, premium services and innovative experiential value all in one place. Since its opening, GINZA SIX has consistently pursued this concept without wavering. Next, I'll explain specifically about GINZA SIX Retail Management. GINZA SIX operates as a joint venture business and GINZA SIX Retail Management serves as its comprehensive operating company, overseeing all aspects of commercial operations. This includes tenant leasing services for visiting customers, promotions and facility management.

Within the Promotion & Services Division, where I work, our primary responsibilities include managing brand value and maintaining a cohesive brand identity. Additionally, we plan and implement our programs, manage membership and VIP programs and focus on enhancing customer touch points and engagement quality. Next, I will explain value creation through diverse talent exchange within GINZA SIX. There are 2 major characteristics of operations at GINZA SIX.

First, many of the staff working here, including myself, are seconded employees from the JFR Group. This includes individuals with backgrounds in department stores, shopping centers, retail, real estate and creative fields. The diversity within this talent pool allows for entirely organic collaboration and integration, combining unique experiences and expertise.

For example, department store staff bring deep knowledge gained from long-standing relationships with affluent customers and exceptional leasing capabilities for luxury brands. PARCO team members contribute creative project planning and content development expertise. Together, these collective strengths converge at GINZA SIX, enabling the creation of unique and innovative experiential value that transcends the boundaries of traditional commercial facilities.

This next slide shows specific examples of value creation, specifically cultural outreach. Our programs embody this unique experiential value. GINZA SIX features a soaring multistory atrium space that spans from the second to fifth floors. Since 2017, we've hosted numerous large-scale art exhibitions here through collaborations with renowned artists like Yayoi Kusama. One recent example shown here is our collaboration with Kenji Yanobe on the BIG CAT BANG exhibition. This effort went beyond simple displays, expanding into installation art, original merchandise and other creative ventures, generating significant public interest.

Additionally, as shown on the right side of the slide, we've utilized the rooftop of GINZA SIX for initiatives like Art Park, further enhancing cultural experiences. Cultural experience events for VIPs and brand collaborations on the next page have been highly praised for their unique GINZA SIX experience. Furthermore, the collaborations with brands shown on the right were developed in close consultation with the brands themselves, resulting in successful implementations. These initiatives are not merely events held within the facility. They are positioned and implemented as measures to deepen the brand value of GINZA SIX through tangible experiences.

The core of GINZA SIX's experiential offerings is the Members-only LOUNGE SIX as described here. This exclusive lounge was created in collaboration with New Materials Research Institute. The lounge has gained recognition and acclaim for embodying Japanese aesthetics at a world-class standard. The time spent there itself is regarded as an experience symbolizing the value of GINZA, earning high praise from VIPs. We are also advancing its operation through co-creation.

Finally, I'd like to share my personal reflections on working at GINZA SIX. GINZA SIX serves as a hub where diverse talent interacts, stimulating one another to uncover new insights and create new value. By combining the department stores' expertise in serving affluent customers, PARCO's creative planning and the brand value GINZA SIX has built since its establishment in 2017, we are able to produce exceptionally high-value experiences. This collaborative effort not only ensures the maintenance and expansion of GINZA SIX's brand value, but also highlights the power of talent exchange and value creation.

Going forward, I believe this model can serve as a strength for other business areas and projects within the group, fostering a chain of value co-creation through talent collaboration with GINZA SIX serving as the hub. That concludes my presentation. Thank you very much for your kind attention.

Moving on to the final part of today's presentation, I'd like to introduce Mr. Saito, who was appointed as one of our Outside Directors this fiscal year. Mr. Saito will share his insights on the current state and challenges of the company from the perspective of an outside director. Mr. Saito, the floor is yours.

Good afternoon. My name is Kazuhiro Saito. I believe I bring a relatively fresh perspective, so I'd like to share a few thoughts. Before I begin, I would like to clarify how I personally view this group. If my perspective was completely misaligned with how those of you here and those watching perceive it, the discussion would not be productive. So I would like to first outline how I see the group. I come from a manufacturing background, but I believe this company and group fall into the category of a lifestyle and culture enterprise.

This category spans a wide range from consumer goods to arts, focusing on providing solutions that enhance people's daily lives. In this category, what matters most from my experience and personal view lies in how effectively the company can acquire and retain loyal customers. Everything hinges on the ability to generate and maintain regular customers. In Japanese, we often use the word akinai, meaning commerce. It implies that customers do not grow tired, but instead continue to return again and again to visit, to experience, to order and to engage.

In that sense, I believe this should be the basis of measuring the ultimate corporate value of a lifestyle and culture enterprise. In that regard, I would say that one of our group's strengths lies in the ability to continue offering content that keeps customers engaged and prevents them from losing interest. By content, I mean a broad spectrum ranging from tangible goods to experiential offerings.

It is the ability to discern and curate high-quality content, combined with the capability to effectively present it to customers and translate it into actionable implemented expressions that defines the unique strengths of this group. I understand the shared foundation as a core aspect of our competitive advantage. However, when delving into the details, I believe it would be worthwhile to hear your perspectives on this matter at another opportunity as the group possesses distinct strengths that vary widely across its businesses.

For example, PARCO is thoroughly culture-driven in its mindset, approach and actions. It's a cultural dream that invites customers to explore a variety of offerings and experiences while expanding networks horizontally. By contrast, Daimaru Matsuzakaya is more community-driven. It is not merely long established in its regions, it is deeply embedded in them. One might even describe it as a landmark-driven model that continues its business in an entirely different manner.

I see the group as a highly unique combination of these contrasting approaches. As Mr. Kobayashi explained earlier, GINZA SIX represents an effort to intentionally bring these 2 elements together. The term community-driven may sound abstract, but I would ask you to imagine a well that produces excellent water. People naturally gather there, not only because they can reliably draw good water every day, but also because they can meet others, talk and encounter various goods and offerings available at that place.

If we can truly combine the ability to conduct business through the inherent drawing power of the place itself with PARCO's strengths in fostering communication and interaction from another angle, where customers visit each morning with excitement, wondering what they will find there. I believe GINZA SIX will become a beloved brand cherished by customers for generations.

Shifting slightly, I'd like to touch on branding. When children grow up familiar with a particular brand, it gains significant strength and staying power. In financial terms, such brands generate steady revenue, ensuring long-term prosperity with all stakeholders. To achieve that, however, a newly emerging brand that has gained initial traction, GINZA SIX, for example, must confront key questions over the next 20 years. How will it evolve? How will we continue to invest in it? How will we ensure its ongoing development? I see this as a significant and positive challenge for management, an important experiment in the best sense of the word.

In reviewing our group's history, I was struck by its depth. There are only 900 companies in Japan with a history of over 300 years. Meanwhile, there are 45,000 companies with 100 years or longer in history globally, meaning almost 1/2 of them do exist in Japan. The enduring strength of these businesses arises from steadfast commitment to customers' trust and expectations. Rooted in the principle of service before profit, our group's retail operations have upheld uncompromising standards, consistently exceeding customer expectations.

I view this as a group with a truly outstanding potential far beyond the narrow definition of retail. It is a lifestyle and culture enterprise. Despite my relatively short tenure, this reflects what I have observed and felt since joining. To be honest, challenges exist in every company, and we are no exception. What concerns me most is the evolving role of the company itself, particularly with the establishment of the headquarters.

While I won't comment on the structure of your companies as that is a matter for each company individually, companies with grand presidential offices where the President remains seated and stationary often end up failing sooner or later. Headquarters organizations tend to grow bloated if left unchecked. While I believe they are fundamentally useless entities, my primary challenge is how to manage them and transform them into lean, high-performance headquarters that are truly useful to the field.

Therefore, while we have adopted the organizational structure outlined in this presentation, it may not be the ultimate solution. In truth, this is inherently a field without clear answers. What is essential is that management maintains a flexible mindset. Above all, we must recognize that organizations naturally tend to become rigid and must be kept constantly in motion. Fortunately, in observing President's owners leadership, I see not only our commitment to developing internal talent, but also a readiness to bring in external talent when gaps are identified.

At the same time, there is a clear effort to keep organizational layers as lean as possible. We intend to support these efforts and continue to monitor them closely as we move forward. This brings me to the next point, which ties into the earlier reference to akinai, commerce that does not allow customers to grow tired. The question is, how do we view our customers? In this context, customers refer to those who ultimately engage in purchasing activities. Whether or not these customers have any particular interest in the corporate name J. Front Retailing is not something that concerns me greatly.

Instead, I believe we should reassess how customers view and interact with our core locations, such as Matsuzakaya in Sakae, Daimaru in Shinsaibashi and PARCO in Shibuya. I believe we need to reaffirm clearly how customers view these places and why they decide to come. Over time, as we have pursued operational efficiency and commercial efficiency, there has been a tendency to focus on placing brands organized by category inside a physical box.

However, if we limit ourselves to this type of curation, the experience becomes indistinguishable. Wherever customers go, it ends up being the same. They might even opt to shop online instead. That said, human being still crave interactions with other people and want to visit places that offer unique experiences. The key question, therefore, is how we assign value to the place itself. That place becomes the brand stored in the customers' memory.

Depending on how we approach it, this value can also be measured through appropriate metrics. In regard to this point, I believe we need to develop a much more rigorous understanding. Based on that, the next step, when and where will follow. It may not be limited to GINZA SIX. We could also create new formats beyond GINZA SIX. In some cases, a specific location may be better developed under the Daimaru brand or perhaps with PARCO or even Matsuzakaya.

By having multiple options and adopting a flexible approach that is responsive to customer needs, I would like to see the company evolve into enterprise capable of effectively through diverse situations. As explained earlier by President Yoshimura of J. Front Design & Construction, one of our significant strengths is the ability to bring concepts to life as tangible expressions of place. This capability is extremely powerful, not only internally for our group, but also in terms of delivering solutions to external clients.

If we combine this with our developer expertise, I'm confident that we can grow into an outstanding group that can create new landmark communities and provide culture networks that transcend them. Looking ahead, virtual spaces will undoubtedly become part of the equation. I believe we should embrace this possibility as well in our future endeavors. When we look at companies with history spanning 300 to 400 years, those that have reached the 100-year mark inevitably ask themselves at the key milestones what we will do for the next 100 years?

A 50-year-old company asked what we will do for the next 50 years. A 400-year-old company asked what we'll do for the next 400 years. Extending that logic, the next horizon would be 500 years, assuming, of course, that the world continues to exist. While we can only hope that the world remains stable over such a time line, it is important to maintain a long-term vision while staying committed to the foundational principles, company ethos or family values that must be preserved.

Over successive generations, some interpret this principle as absolute rules that must always be upheld, central pillars with no exceptions. Others may see them as foundational guidelines that permit flexibility and evolution in other areas. Ultimately, each generation may take a different approach, but I believe it is precisely this balance that has enabled such companies to endure to this day.

As we look for the next 500 years, I use the phrase strength and flexibility. I do not mean it in the sense that flexibility overcomes strength. Rather, I mean that we must embody both strength and flexibility together. That is the intent behind including this phrase in the agenda. To achieve this, I would like each organization to possess the strength of a single unified organism. If we misunderstand what an organization is, we end up fitting people into an organizational chart. In fact, everyone works interconnected with each other.

Unless we understand the organization as a single living entity, its true strength cannot be unleashed. An organization needs 3 elements: young people who will lead the next generation, facilitators who can effectively and carefully drive the organization forward and individuals with exceptional talent. When these 3 elements come together, I believe it creates an organization that combines strength and flexibility and organization capable of unleashing creativity.

This relates to not only for our HR and training systems, but also to how those systems are operated in practice. While this isn't a major challenge per se, I want to focus carefully on how we evaluate and develop our people. Having said that, within the current environment, what becomes critical is not simply how we utilize digital tools. Rather, without digitalization, it will be impossible to share the kinds of perspectives I have outlined with everyone instantaneously.

In that sense, progress in this area is urgent. From my own experience, when integrating companies with diverse backgrounds, you must align the layers of HR systems in various ways. At such times, fairness and impartiality are essential, which necessitates advancing transparency. If you aim to accelerate the speed, granularity and the circulation of information, digital transmission becomes indispensable.

In this regard, I believe our group and the company still face challenges looking back from digitalization. This include enhancing the agility and the performance of the headquarters and its functions, making them leaner yet more capable, developing strategies to respond to future changes from a true customer-centric perspective and strengthening our digital foundation. In addition, we must also address how we develop the talent and how we attract it. As an outside director, I intend to closely monitor these 3 areas and to provide meaningful support whenever I can. That concludes my remarks. Thank you very much for your attention.

We will now begin the Q&A session. First, Mr. Takahashi of Mizuho Securities.

This is Takahashi from Mizuho Securities. First, thank you very much for holding another highly insightful briefing. It was truly informative. I have 2 main questions. One is for Mr. Yoshimura and the other is for Mr. Saito.

First, I'd like to ask Mr. Yoshimura, I have been covering your group for some time, so I believe both companies are strong businesses, and I think I understand each company's strengths. I believe we've had a chance to review that today. When these companies merge, where do you see the potential for synergy? Simply combining into a single entity is not sufficient, and I don't believe that's your view either.

If Daimaru Matsuzakaya and PARCO were to continue operating separately as before, ultimately, nothing will change. In that context, what kind of synergies do you, Mr. Yoshimura, expect? I believe there will be synergies within interiors and facilities, respectively. The fact that you operate in both interior design and facility development strikes me as a significant advantage. Please share your thoughts, including from that perspective.

My second question is for Mr. Saito. Thank you very much for the very clear explanation. I ask the same question of all outside directors. Although you haven't yet been in the role for a full year, I would like to ask you 2 things. First, drawing on your extensive experience, and it can be in comparison with other companies or from your own professional background how open is the atmosphere of J. Front's Board of Directors?

For example, is information readily accessible? How active and substantive are the discussions at Board meetings? I ask this as a routine point of confirmation, so I would appreciate your candid impressions. Second and more fundamental, you have had a long career at Suntory with experience in both China and Japan. Earlier, you spoke about various strengths, organizational capabilities, talent and challenges.

From your perspective, where do you see the core strength of the J. Front brand? Japan has many strong department store operators within that competitive landscape, what defines the brand strength of Daimaru Matsuzakaya, PARCO and J. Front as a group? Manufacturers invest heavily in marketing to extend their brand. Fortunately, J. Front has physical stores, which provide a clear advantage. However, as you move into digital spaces, I believe you will need marketing approaches from a different perspective, similar to what manufacturers have long practiced.

In that context, where do you see the brand's core strengths? And what potential do you see for J. Front to communicate those trends more effectively to external audiences? I would greatly appreciate your insights.

Thank you for your question. I will answer regarding J. Front Prime Space. With respect to the synergies that we expect from merging the 2 companies, I will begin with the interior design business. As I mentioned earlier, securing talent in this field is extremely challenging. PARCO Space Systems has around 100 people in its interior design division. At present, much of the work in commercial facilities, particularly within shopping centers involves food and retail tenants.

By contrast, our focus tends to be on more luxury-oriented projects where the order value per project differs significantly. In addition, because we often secure projects upstream in the value chain, our profit margins tend to be relatively high. We won't shift all personnel to the luxury segment, but bringing some of those resources over would allow us to capture opportunities that we are currently unable to pursue due to capacity constraints.

In fact, there are projects we've had to decline simply because of insufficient personnel. By optimizing resource allocation, we believe we can better capture these opportunities going forward. Another point concerns interior supervision and management. PARCO Space Systems has expertise in interior management within shopping centers. From this capability, related commercial facility projects sometimes emerge by approaching these opportunities with a focus on improving profitability and productivity. We believe we can enhance margins even on similar types of projects through better execution and operational efficiency.

On the other hand, regarding the synergies between facilities, since facility operations are embedded within Daimaru Matsuzakaya and PARCO buildings, this is inseparable. Ensuring safety and security within these facilities must be maintained at all times. At the same time, as mentioned earlier, PARCO Space Systems has been steadily expanding into adjacent areas such as hotel cleaning services and acting as an agent for certain brands. These are some of the recent business ventures for PSS.

These areas have strong affinity with the interior business. For example, in hotels, renovations typically occur on roughly a 10-year cycle. By being involved in operations and management, we gain early access to such information. And that enables us to create a cycle in which renovation projects naturally follow within the same company. We see significant synergy potential here. This concludes my remarks. Thank you.

This is Saito. Regarding the atmosphere of the Board of Directors, the discussions are quite active. While the debates can get intense, they are always conducted with proper decorum, of course. It may be inappropriate to say I enjoy them, but I attend each meeting with genuine anticipation. Please be assured on that point.

Based on my limited by relevant experience elsewhere, I would describe the Board as both candid and vigorous in its discussions. Turning to the question of brand strength, particularly the strength of brand as a place. Daimaru Matsuzakaya is a brand that feels as though it simply belongs there. It's extremely strong. People often say a brand progresses through 3 stages: curiosity, empathy and finally, reassurance.

Daimaru Matsuzakaya has fully reached that final stage of reassurance. That kind of brand does not easily falter. Conversely, because customers hold it in such regard, it is not something that we can casually tamper with. Stabilities demand respect. PARCO may evoke a similar feeling for Tokyoite who have experience in Shibuya. PARCO originally means Park, a place where diverse people gather. I believe that was Mr. [indiscernible] original vision and remains true today, including for international visitors who gather there.

Compared with the full landmark brand that feels inevitable and deeply rooted, PARCO is lighter and more fluid. It's about people exchanging information going to the PARCO Theater and perhaps stopping buying Nintendo afterward. It feels like casually gathering in a park. The weight is different, but the power to draw is very strong. Viewed from a more critical angle, the challenge for a landmark type brand is how to extend itself outward beyond its physical base and how to communicate.

PARCO, on the other hand, excels at providing information to network-oriented individuals. Yet when we consider that people ultimately need physical places, the question becomes what kind of place to offer when and where in what form. While the degree of flexibility is high, it's an ongoing pursuit. Each brand has its own challenges.

As I mentioned earlier, landmarks and community-based presence are essential. They serve as a foundation for communication. Why do Japanese products sell? Because they are Japanese products because they come from a place like an eyewear maker in Shibuya. Many people understand that without a physical presence, there's nothing. The question is how to expand while retaining that foundation. One possible avenue is virtual space. That said, virtual alone is insufficient. People ultimately want to go somewhere and meet others. Inbound tourism clearly demonstrates this.

People feel compelled to visit. Therefore, physical places should remain the priority, complemented by outreach. Virtual or network-based outreach can deliver value in advance or at a distance. And in between lies perhaps the strongest aura, gaisho, grounded in deep customer understanding. Personally, I would not mind if gaisho traveled the world. Rather than simply following up with customers who visit our stores, I would welcome the day when a Daimaru representative is negotiating with a client in Frankfurt.

I believe J. Front can find the right mix between virtual platforms, people and physical places. Given my age and perhaps conservative instincts, my personal view is that we should prioritize place. The more digital technology advances, the more people will seek warmth and physical connection. Observing the way younger generations engage passionately in fandom activities, I sense this to be true. I don't know whether that fully answers your question, but those are my thoughts.

Next, we will take a question from Mr. Shigeoka of Daiwa Securities.

This is Shigeoka from Daiwa Securities. I'd like to ask each of the 3 speakers a question. My first question is for Mr. Yoshimura. This is somewhat basic. But on Page 11 of the material, you show operating margin. Compared to other companies, what factors drive the differences in operating margin? I understand positioning and business structures differ. But in your case, what is the background to the slight decline in fiscal year 2025? Is the difference structural? And is there room for improvement?

Is the question about the combined numbers on the far left.

Yes, please answer on a combined basis. There are differences between J. Front Design & Construction and PARCO Space Systems. I would like to ask whether you can narrow the gap with other companies by coming together and if there is upside potential.

Thank you very much. First, for J. Front Design & Construction, if you look at the right-hand side, the profit margin is 7.1%. Tanseisha and Nomura Company Limited are generally in the 7% range. Other companies are at 6%. As I mentioned earlier, we see that the profit margin of J. Front Design & Construction itself is by no means on the low side. Even within the industry, the company is operating with a considerable amount of earnings.

On the other hand, PARCO Space's margin is lower. While the Interior Construction division has a relatively high margin, the facility operations segment, especially when services are provided within the group, does not operate on a profit-making model. Instead, it consistently generates a fixed percentage over the long term, meaning it provides a steady, predictable level of earnings annually.

When we combine these differences, the result is the figure shown on the left. Compared to the other companies that don't have a facility business segment, the inclusion of this segment makes the profit margin appear lower. On the other hand, as mentioned in the response to your earlier question about how we plan to increase profitability, particularly in the interior design business, we are actively involved from the very upstream stages.

Our focus is on continuing to improve the profit margin of the construction work itself. Regarding the Facility segment, as outlined earlier in our strategy, we aim to improve profitability by securing external projects. We intend to work on these to increase the profit margin. If you look at the Facilities business alone, we estimate this accounts for about 5% to 6%. So PARCO Space Systems is not exceptionally low.

Also, a major factor is that we are operating within Daimaru Matsuzakaya and PARCO. Does that answer your question?

I understand very well. Incidentally, on Page 21, you've included the vision you aim for in 2030. Could you tell us the baseline you're envisioning for the annual growth rate in revenue and operating profit going forward? If you can share any quantitative targets or benchmarks to help us frame that outlook, it will be appreciated.

As I mentioned earlier, within the industry, we're surpassing space and becoming a company that exceeds JPY 70 billion. This is simply the total of the consolidated earnings forecast for 2025. Our next target is Tanseisha, which is around JPY 100 billion. So prime Space will focus on scaling towards that level. Naturally, we'll also aim for comparable profit margins.

Frankly, reaching Nomura Company Limited would require considerable M&A activity or various other measures. For now, we intend to focus our efforts on catching up with Tanseisha. I hope that addresses your question.

For my second question, I would like to ask Mr. Kobayashi. On Page 31, you mentioned expanding communication with new customer segments. I believe GINZA SIX, Daimaru Matsuzakaya and PARCO have strengths in different customer segments. Looking ahead, where do you see the greatest growth potential?

Personally, I believe Daimaru Matsuzakaya has significant growth potential, particularly in attracting a slightly younger demographic rather than the senior customers traditionally associated with it. They are increasingly collaborating with PARCO on various initiatives. Do you see more potential with younger customers or looking more broadly at affluent consumers. Do you see considerable untapped potential across all these brands? There are likely multiple factors, but could you share where your expectations are particularly high? This includes your thoughts on talent, employees and the people who gather there. I'd very much appreciate hearing your perspective.

This is Kobayashi. Thank you for your question. While I can't speak to the overall customer base, I'll focus specifically on GINZA SIX. As for the customer profile we aim at for GINZA SIX, we focus on 2 key aspects: borderless, meaning customers from anywhere in the world and ageless. As a result, in terms of the tenants we have at GINZA SIX, affluent individuals show very strong support.

We believe the growth in this segment is exceptionally strong. Going back to the customer profile, I feel that growth is expanding in an increasingly borderless way. In terms of this potential, we see opportunities linked to Japan's tourism and its global positioning. In that context, we see significant room for expansion among affluent customers on a borderless basis. I hope this answers your question.

Thank you. GINZA SIX has achieved remarkable success in branding and has firmly gained the support of affluent customers. I believe that employees working at GINZA SIX learn various skills and gain expertise, which they then apply at other locations like Daimaru Matsuzakaya or PARCO. This is facilitated by the system or rather by promoting talent exchange and high personal mobility. Would it be fair to say that we can expect such synergy effects to gradually emerge going forward?

I believe that is the ideal outcome.

Finally, for my third question, I would like to ask Mr. Saito. Regarding organizational structure, you mentioned earlier that a compact, high-performance headquarters is preferable. Currently, I understand that J. Front is also implementing initiatives where the holding company itself or rather the headquarters is temporarily bolstering its personnel count in order to enhance efficiency across the entire group.

Regarding your approach to the headquarters function that unifies diverse businesses and talent, how do you plan to evolve this within the company going forward? Appreciate if you could elaborate on these points.

Related to this point, I imagine that by prioritizing and developing talent, there will be a push to strengthen recruitment. Would you share your views on whether this may become a risk creating excess headcount and whether the placement of the right people in the right roles and talent exchanges will proceed smoothly, including aspects of talent development. That concludes my question.

This is Saito. Thank you for your question. I believe the issue you just raised touches on fundamental challenges faced by all companies. Please understand that I'm speaking under the assumption that I do not yet know everyone personally at this point, nor do I have a complete grasp of the entire organization as individuals or faces.

First, companies or organizations with lengthy decision-making processes are generally no good. When decision-making drags on, various opinions get involved, and it's common for the forecast to become blurred. Failure is inevitable. Nothing works properly every single time. In every business [indiscernible] initiative, if the decision-making process is short, you can consciously identify where you went wrong and react quickly next time.

Trial and error is the only way forward. We can only learn from failures. While thickening layers is theoretically possible, I mentioned earlier from experience that unless you constantly apply pressures to keep them thin to avoid thickening them, they naturally become thicker. What tends to happen is that individuals rise in status simply by asking questions. Without taking ownership of execution, they raise concerns. People driven by anxiety and self-preservation instincts tend to voice their concerns without doing actual work.

As a result, they can generate an infinite number of worries. When they bombard the front lines with those endless concerns, those on the receiving end respond by creating additional planning or coordination functions to manage the questions. This leads to the operational system growing out of control. Therefore, when things go wrong, you begin to hear statements such as I'm doing my job properly or performance fluctuates, right? When it's bad, I'm doing my job properly. my department is doing its job properly.

And then what the senior management is saying, if you hear those comments, the organization is already in serious trouble.

Based on experience, I have come to believe that the organization needs a complete overhaul at that point. We must not be swayed by the noble sounding idea that adding layers to improve efficiency is beneficial. People at headquarters should focus on delayering. If you don't, you will end up with many dual assignments being issued. That itself is not a problem. If necessary, we can address the personnel and the compensation implications accordingly.

The key is not risk organizational design, but how quickly the organization's functions can turn and respond. This is my first point. Of course, I have no idea what is going to be the right answer, whether or not the current organization is right or the different organization should and has explored. It all depends upon the situations you find yourselves in. As you noted, our group has a highly capable talent across the organization. However, whether we are fully leveraging their potential is another matter.

From an outsider's perspective, I do sense there's still a tendency for people to identify too strongly with their own respective affiliations. That said, this is not unusual. I have experiences of integrating multiple companies, and everyone starts out that way. The question then is how we address it in tactical items. As Mr. Kobayashi mentioned earlier, it involves personal exchanges as he just explained in his response to your question, including enabling those who have gained experiences in one area to move to another.

In my view, we are reaching a stage where such cross-functional mobility should be formalized to a certain extent within our HR framework. I hope this addresses your question. That concludes my response.

Thank you. I believe you have diverse and highly capable talent. So we have high expectations for talent exchange and the realization of the synergies. That's all. Thank you indeed for your kind response.

I'm Nagamine, Executive Officer and Senior Executive General Manager of the Financial Strategy Unit at J. Front Retailing. Thank you very much for taking the time to join us today despite your busy schedules.

First, I will explain the first half FY 2025 results and the full year FY 2025 forecast. J. Front Retailing's consolidated gross sales for the first half FY 2025 were JPY 622.5 billion and revenue reached JPY 219.9 billion, both increased year-on-year. However, due to increased costs such as personnel expenses, business profit decreased by 13.2% to JPY 28.1 billion. Operating profit decreased by 23.9% to JPY 29.9 billion, and profit attributable to owners of parent fell by 36.9% to JPY 18.3 billion. As a result, profit declined at each level and all figures fell short of the forecast announced in April.

Regarding shareholder returns, in line with our policy of maintaining a payout ratio of 40% or higher. We increased the interim dividend by JPY 5 per share year-on-year to JPY 27 per share as announced in April. In addition, from the perspective of optimizing the amount of shareholders' equity, we conducted share buybacks totaling JPY 15 billion from April to August.

Next, I explain the performance by segment. First, regarding the department store business. Last year, inbound sales expanded far beyond expectations, starting around this spring, however, sales significantly decreased year-on-year by the shift from the substantial yen depreciation to appreciation.

On the other hand, domestic consumption continued to perform robustly, driven primarily by higher spending per customer, supported by the various effect stemming from rising stock prices, among others. One example is that the largest event for Gaisho customers in the first half achieved the record high sales.

Additionally, the opening of an official shop at the Osaka/Kansai Expo also contributed to boosting domestic sales. However, SG&A expenses were impacted by cost increases, including personnel expenses associated with base salary hikes, commissions related to the establishment of the official Osaka/Kansai Expo shop, outsourcing cost, personnel dispatch expenses and increased repair cost due to renovation work.

While these costs were controlled to a certain extent compared to the initial plan, the larger-than-expected decline in inbound revenue had a significant effect resulting in both decreased revenue and profit in the department store business overall.

In the shopping center business, we successfully minimized the impact of reduced floor space due to the large-scale renovation work at Shibuya PARCO. By our focus on expanding PARCO's unique Japanese content, we were able to attract a significant number of customers from Japan and overseas. Notably, inbound volume increased by 20% year-on-year in sharp contrast to the department store business. Furthermore, the entertainment business, including theatrical productions and the character-themed cafes performed strongly.

In the shopping center business, the strong top line performance offset increase in cost of goods sold and SG&A expenses, resulting in an increase in business profit. Factors such as gains from the sale of land contributed to a double-digit increase in operating profit.

In the Developer business, J. Front Design & Construction saw active progress in orders for department store renovation project and construction work at luxury brand shops. J. Front City development carried out asset replacement for multiple properties, combined with favorable conditions in the real estate market, we were able to mitigate to some extent the reactionary decline from the gain of property sales in the previous year. As a result, the total performance of the developer business improved to a profit level close to that of the previous year, despite the initial plan forecasting the significant year-on-year decline in profit.

In the Payment and Finance business, revenue increased due to growth in merchant commissions. However, costs related to acquiring new members and add expenses, as well as personnel costs associated with the issuance of the new PARCO card and Hakata Daimaru card impacted and posted declines in both operating profit and business profit

Next, the performance of Daimaru Matsuzakaya by specific stores is shown on Slide 6. On a comparable store basis, stores with high inbound sales shares such as Shinsaibashi and Kyoto stores struggled, resulting in a 1.6% decrease in revenue. Amid these challenges, Umeda store achieved a double-digit growth in overall sales, supported by the successful expansion of character themed content, which contributed to a 30% increase in inbound sales

The Nagoya store, which has been undergoing a large-scale innovation project since last fiscal year continued to be affected by the construction work, but the effects of the renovations gradually started to emerge from the latter half of the first half, and we see this will lead to the full-scale operation in the second half.

Inbound sales department stores saw a sharp slowdown in general merchandise sales during the first half of the current fiscal year, beginning in spring due to the appreciation of the yen, which narrowed the Japan overseas price gap in luxury brands.

As a result, the average customer spending declined by approximately 30%. On the other hand, the number of customers has continued to increase. And we maintain the view that inbound shares represent an important market that department store can steadily grow over the medium to long term with appropriate response capability.

Looking at customer numbers by country, China and Thailand showed a significant growth with the customers from China increased by 25.5% year-on-year and those from Thailand increased by 40%. This slide shows SG&A expenses for Daimaru Matsuzakaya department stores for the first half of FY 2025. Year-on-year increase was due to costs related to the expo, commissions due to the increased use of third-party credit services and expansion of QR payment and outsourcing and commissions fees, as well as ad expenses due to the Nagoya store renovations and enhanced events at various stores.

On the other hand, compared to the April forecast, we managed to reduce expenses by JPY 0.5 billion, mainly in personal expenses. Performance of PARCO by store is shown on Slide 9. Shibuya PARCO undertook its first large-scale renovation since its reconstruction and reopening in 2019. Consequently, the impact of construction limited revenue growth to single digit in the first half, but the store has regained its original momentum since the renovation completion in September.

Meanwhile, Nagoya PARCO and Sendai PARCO saw steady effects from the renovations of their pop culture and fashion loans, leading to a double-digit increase in revenue. Overall, PARCO stores continue to perform strongly.

Next, this slide covers the consolidated balance sheet results. Interest-bearing liabilities, excluding lease liabilities were JPY 184.9 billion, a reduction of JPY 5 billion from the end of the previous fiscal year, even including the JPY 30 billion in bonds issued in the first half.

The next slide shows our consolidated cash flow results. Investing cash flow decreased by JPY 5.3 billion year-on-year, partly due to the absence of the impact from the share acquisition related to the Daimaru Shinsaibashi store sales building conducted in the previous fiscal year.

Next, I'll explain the performance forecast for the second half and the full year FY 2025. Please refer to Page 12. While the employment and income environment continued to improve, under the new political framework now being advanced, we anticipate that specific economic measures, such as tax cuts aimed at stimulating the economy may be introduced depending on future development. Spending among upfront consumers is expected to remain robust, driven by the various effect generated by the strong performance of the stock market.

Regarding inbound tourism, our view that it remains a growth market with increasing customer numbers in the mid- to long term remains unchanged. However, we have come to recognize that the surge in department store inbound sales last fiscal year was a temporary spike driven by the rapid yen depreciation. Consequently, for this fiscal year, we have shifted to a more cautious outlook regarding the trend in high-end products. We believe it is necessary to assume that lower customer spending levels in the first half will continue to some extent in the second half as well.

On the other hand, while the market turbulence initially seen at the beginning of the fiscal year has temporarily subsided regarding the impact of the new tariff policies introduced in the U.S. on the global economy, it remains unclear at this point how much these policies will have a long-term impact across various industries. We continue to monitor the situation closely.

Additionally, while price increases, particularly in food prices continue, if the positive shift in real wages is not sustained, we believe it is necessary to anticipate a downturn in consumer confidence. Based on this business environment, we forecast full year consolidated gross sales to increase by 1.9% year-on-year to JPY 1,293 billion. However, business profit is expected to decline by 9.3% to JPY 48.5 billion, and operating profit is projected to fall by 24.4% to JPY 44 billion due to the reactionary decline from the onetime gain of JPY 8.5 billion from a gain on step acquisition in the previous year.

Compared to the April forecast, gross sales have been revised downward by JPY 23 billion, business profit by JPY 5.5 billion and operating profit by JPY 6 billion. Regarding dividends, we plan to increase the annual dividend by JPY 2 per share to JPY 54 per share, maintaining the balance between the interim and year-end dividend as planned at the beginning of the fiscal year. This represents a fifth consecutive year of dividend increase following the COVID-19 pandemic.

The outlook of each segment is outlined on this slide. In the department store business, we anticipate that the domestic demand will remain firm especially among upfront consumers. This will be supported by initiatives such as cultivating new high-value Gaisho customers in priority areas and strengthening out-of-store events.

On the other hand, regarding inbound consumption, which expanded rapidly last fiscal year. We have revised our sales forecast from the initial plan based on the trends in the first half. For the shopping center business, the first large-scale renovation of Shibuya PARCO since its reconstruction in 2019 was completed, and the positive effects are expected to emerge from the second half onward. And by promoting reforms of the sales floor layout at each flagship store, including the renewal of allocations focused on IP content in Japan mode, we anticipate continued steady growth in capturing both domestic and overseas demand.

The developer business is expected to experience a year-on-year decline in revenue and profit due to gains on sales of real estate assets in the previous fiscal year as well as a pullback from the orders for large-scale renovation work at department stores. However, given the performance of the first half, we have revised the initial plan upward and expect significant improvement.

For the payment and finance business, we anticipate increased revenue driven by higher commission income from an increase in transaction volume, including the effect of consolidating cars within the group, such as a new PARCO and Hakata Daimaru card. However, as upfront cost for acquiring new cardholders, we continue in the second half, both business profit and operating profit are expected to decrease. The sales outlook for the major stores of Daimaru and Matsuzakaya is shown on this slide.

The Nagoya store, which has been undergoing the large-scale renovation since last fiscal year, has largely completed the construction work, and we expect the revenue growth effects to fully materialize from the second half of this year.

On the other hand, for stores with significant growth in inbound sales last year, such as Kyoto and Sapporo stores, we have carefully reassessed their sales forecast. As previously announced, the Umeda store, which has performed strongly with a double-digit growth in the first half began major renovation work in mid-October. With the closure of the upper floors and construction work on each floor starting phases, we expect a revenue decline from Q4.

Next is the forecast for SG&A expenses for Daimaru, Matsuzakaya department stores in the second half, as shown on the slide. SG&A expenses are projected to increase by a total of JPY 1.6 billion year-on-year, primarily driven by factors such as the strengthening of Gaisho events, add expenses related to the large-scale renovation of the Umeda store, increased outsourcing and commission fees and higher commissions related to the offshore shop at Expo.

Compared to the initial plan, we expect the increases in commissions, outsourcing and commission fees, while depreciation expenses for the landmark Nagoya Sakae, which were initially included in the SG&A have been transferred to cost as a part of change in accounting treatment. As a result, the increase in SG&A expenses from the initial forecast is limited to JPY 60 million. The forecast for the consolidated balance sheet is shown on this slide.

Lastly, regarding the forecast of consolidated cash flow, we still expect to secure positive free cash flow, although we plan to actively pursue capital investments such as sales floor renovation and property development, mainly in the department store and the developer business to drive transformation.

This concludes my presentation. Thank you very much for your attention.

I'm Ono, from J. Front Retailing. Thank you very much for taking the time to join us today despite your busy schedules.

I would now like to explain the progress of the medium-term business plan. First, on Slide 22. As I have mentioned many times, the group aims to become a value co-creation retailer over the medium to long term. We will work together as one team to create three values and three synergies. The theme of this medium-term business plan is transformation for future growth, and we have already reached the halfway point.

I would like to share my candidate assessment of the results and response during the year and a half, I have been in my current role, as well as my own personal view of the ongoing challenges we face.

First, in terms of response, I would like to mention three things. One is to expand growth potential in the Nagoya and Osaka areas. Please look forward to the Sakae area next year. I believe that we are achieving steady progress in our efforts to make the entire Sakae area of destination for people. In Osaka, we have made preparations for new development to solidify our leadership position in Shinsaibashi, while in Umeda, we are advancing well-balanced preparations by pursuing efficiency, while considering the surrounding oversaturation of stores, yet simultaneously driving differentiation.

The second is content ownership. I feel confident that we can materialize all aspects of MD, including merchandising, product content, IP content and service content. Moreover, we have been able to achieve this within a relatively short time frame. Of course, scaling up the business is the most important thing and I fully understand that this will come later. However, I believe that taking that first step firmly is a significant achievement.

Third, we have been able to expand and strengthen our customer base, both domestically and internationally. We have successfully sourced all of the group's commercial cards in-house, commenced issuing new cards and advanced efforts to connect with our overseas VIP customers. While we anticipate this will likely promote circulation within the group to some extent, we have also refined the specific measures in this area.

On the other hand, I'd like to mention three areas where we recognized challenges for the future as well. One is that we must continue to explore growth investment opportunities, including M&A to expand our business portfolio, while M&As involves other parties and cannot be rushed. We intend to thoroughly evaluate growth investment targets, including those that transcend the framework of our existing businesses.

The second is building the foundation to achieve growth in the sense of increasing top line revenue, particularly the organization, personnel and fostering the corporate culture. Since taking office in March last year, I have been emphasizing that we must move forward in these areas, but they recognize it will be difficult. And honestly, it will take time.

At Daimaru, Matsuzakaya, in particular, a powerful success story and mindset in sales reform permeates every corner. Therefore, I have the impression that there are still many employees, though certainly not all, who are reluctant to make decisions on their own and are unable to be proactive. To shift them to the market-oriented mindset, we need to keep adding more and more approaches. We have brought in someone from the outside to head our human resources strategy. As we begin implementing additional concrete actions at the operational level, we intend to ensure we keep up with these developments.

The third is the fundamental transformation of business operations through the use of AI. We have been making solid progress to date in terms of productivity improvement, but we now believe that we are entering the phase focused on enhancing our top line growth. By leveraging AI to further increase productivity, enrich customer touch points and launch new services, we believe we can aim for an even higher level by using AI as a foundational infrastructure for these efforts.

However, we recognize that the concrete plans for this area are still insufficient. We are determined to invest further resources to catch up in this area, as we firmly believe AI will be a game changer for our retail business. We intend to advance our efforts based on this conviction.

Back to the slide description, Page 24. This page is titled "The Medium-term Business Plan and Future Initiatives." And the purpose of this page is to declare that actions outlined here will bear fruit in FY 2026. In particular, regarding the maximization of investment effects in the upper row, please understand this as a commitment to translate these efforts into revenue and profit within the next fiscal year. On the other hand, we have organized the lower part of the plan so that the content will be finalized by the end of FY 2026.

Page 25. From here, I can be a little more specific. As part of our retail evolution, we have been working to enhance the appeal of our stores. Matsuzakaya, Nagoya has now nearly completed its extensive 2-year innovation. An analysis of ID customer sales for the first half showed solid growth by customers in their 20s and 30s.

Furthermore, the share of Gaisho sales at the store has been increasing even more. We are currently achieving the desired results, and we intend to expand the effect of this area in a store operation policy.

Page 26, PARCO. The entire company is now continuing to perform well. The floor layout reforms led by President Kawase, who has been enrolled since FY 2023 have been successful. In July of this year, we held a business strategy presentation where Shibuya PARCO store manager, Hiramatsu, also spoke as mentioned there, we are fundamentally reevaluating the value of our stores and advancing structural reforms to the floors and interior spaces. As a result, both customer numbers and sales volume are increasing. Inbound sales are also showing solid growth. Shibuya PARCO is performing exceptionally well at the moment.

Next, Shinsaibashi PARCO, like Shibuya PARCO, will undergo its first major innovation as a new store. We hope you will look forward to further developments in this area starting in FY 2026. Page 27 is about inbound demand. Duty-free sales at department stores amounted to JPY 49.7 billion in the first half, with the full year forecast set at JPY 101.6 billion. This first half result of JPY 49.7 billion was a 24% decrease from the previous year.

Although not listed there, inbound sales for the J.Front Group as a whole, including PARCO and GINZA SIX were down only 15% year-on-year in the first half. We believe this is a prime example of how the diversity of our group's commercial facilities contribute to the group's resilience.

On a more topical note, the Daimaru Kobe store has seen a 1.5-fold increase in duty-free sales every month since this summer compared to the previous year. A major factor appears to be the opening of Kobe Airport to international charter flights. However, we also believe that the increase in inbound traffic to our traditionally strong area is also a positive indicator for the future.

While I've mentioned various points, the crucial factor remains what I've emphasized before, stabilization. Our apps inbound membership has surpassed 120,000 users. But more importantly, inbound CRM is vital because it enables us to tailor proposals and attract customers through one-to-one communication. This is one-to-one engagement with VIPs. The threshold is quite high as it targets customers who have completed tax-free procedures at Daimaru, Matsuzakaya department stores at least twice with a total purchase amount exceeding JPY 1 million.

Consequently, the number of customers in this inbound CRM program, which had aimed for 500 during the period of the medium-term business plan has surpassed 1,000 in just over half a year. Originally, this initiative was only promoted at the Daimaru Shinsaibashi store and only to customers from China. But in the second half, the scope of this initiative will be expanded to Sapporo Daimaru, Matsuzakaya Nagoya and Kobe Daimaru. Regarding target countries, following China, we have opened it to Thailand in anticipation of cooperation with Central, a partner of our group

We believe that CRM in this area is not solely about increasing the number of customers or connecting with each individual customer going forward. Therefore, we will work to enhance the appeal of the products we propose and expand our services to maximize effectiveness.

Next, on Page 28 is about Gaisho. Year-on-year growth for the first half was 5.2% compared to the same period in FY 2019 before the pandemic. This represents an increase of approximately 30%. Supporting this is an increase in average transaction values driven by strong sales of luxury goods, watches and other high-end products. However, for sustainable growth, we believe that the main focus should be on increasing the number of active members. While we are also working to uncover dormant accounts, Daimaru Matsuzakaya is now advancing concrete measures to expand the customer base itself. Leveraging partnerships with stores in major cities nationwide and PARCO. We are implementing strategies to expand new Gaisho sales customers in areas lacking department stores in blank areas and in regions without luxury brands.

Next is Page 29, which covers our group customer strategy. With the launch of in-house issuance for the PARCO, Hakata Daimaru and GINZA SIX cards, the total number of cardholders within the group has begun to increase. We can expect both an expansion of the group's customer membership base and a direct contribution to revenue and profit from the next fiscal year onward from JFR Card, which is currently experiencing a temporary decline in earnings due to higher customer acquisition costs.

In addition, since the issuance of the Daimaru Matsuzakaya card starting this month, we believe that the speed of development of such cards will be further increased. In addition, the company's app membership continues to grow. The number of active members of the Daimaru Matsuzakaya app reached 2.88 million at the end of August. This means that we were able to develop 240,000 new application members in 6 months. In addition, we will develop an initiative to enable customers to exchange Daimaru Matsuzakaya points for PARCO points to increase the overall LTV of the group's customers.

Next is Page 29, which covers our group customer strategy. With the launch of in-house issuance for the PARCO, Hakata Daimaru and GINZA SIX card, the total number of cardholders within the group has begun to increase. We can expect both and an expansion of the group's customer membership base and a direct contribution to revenue and profit from the next fiscal year onward from JFR card, which is currently experiencing a temporary decline in earnings due to higher customer acquisition costs.

In addition, since the issuance of the Daimaru Matsuzakaya card starting this month, we believe that the speed of development of such cards will be further increased. In addition, the company's app membership continues to grow. The number of active members of the Daimaru Matsuzakaya app reached 2.88 million at the end of August. This means that we were able to develop 240,000 new application members in 6 months. In addition, we will develop an initiative to enable customers to exchange Daimaru Matsuzakaya points for PARCO points to increase the overall LTV of the group's customers.

Next is Page 30. Here is the priority area strategy. Nagoya Sakae has decided to name its new commercial complex, HAERA, which will be housed in the landmark Nagoya Sakae. We will make a more concrete announcement on the details of the content when we are a little closer to the opening.

As we have consistently communicated, it is important to focus not only on physical infrastructure, but also on initiatives related to the experiential and community aspects. Moreover, these efforts should not be limited to our group alone, but should involve other players in the Sakae area as well. In line with this approach, we held our first community coprosperity event shown at the bottom right, this summer as a concrete initiative.

“POP IS YOU SAKAE” is an art and culture event held in collaboration with facilities in the Sakae area, and we have worked with 14 projects including outside facilities to attract visitors and promote circulation. We plan to further expand these efforts in the coming year and beyond.

Now Page 31. As for the other areas, I do not have any additional information about Shinsaibashi and Hakata to share at this time. We have considered internally the request we received regarding pipeline disclosures, not limited to this matter. However, we have decided to refrain from doing so from the perspective that could potentially cause inconvenience and confusion to stakeholders at our existing stores. we kindly ask for your understanding.

On Page 32, we have once again organized our aims regarding content ownership and development. Until now, our company has focused on the physical location that where and developed retail business around that. However, with virtually no room left for new development in Japan, we believe that dramatic growth is difficult.

Of course, based on the concept that existing stores should always be fresh, we recognize the need to continue redeveloping existing stores as appropriate, yet, amid soring costs and extended time lines, we believe the risks are increasing. That is why we intend to leverage the entire group's business expertise and assets to develop a retail business that owns the content, the products and services we sell. Through the three types of content outlined, we aim to achieve growth that transcends the boundaries of our existing businesses, including expansion into overseas markets and the digital domain.

For merchandising content, Daimaru Matsuzakaya recently announced the establishment of a joint venture with Komehyo, and the launch of Disney-inspired brand called [ Annabelle ] we will also advance diverse initiatives, primarily focusing on food, including developing original products at Kochi Daimaru, supporting business succession funds and nurturing investments in the pride fund portfolio.

PARCO has launched a game publishing business under the label PARCO GAMES. We will release three titles within this year. While we do not own the IP content itself, we have successfully launched our own initiative, utilizing third-party IP, [indiscernible] which has been well received.

This summer, we opened shops in Hong Kong and overseas. As part of our service offerings, we have launched a reuse business through a joint venture with Komehyo. We have already opened four stores and we are currently exceeding our purchase volume target for the current fiscal year ending September. We are feeling quite encouraged by this progress and the overall momentum.

As I mentioned earlier, we fully recognize that scalability poses a challenge for our content owning business. Nevertheless, we have taken the first step by leveraging our store and customer assets as an incubator for this content, we will proceed with this initiative through repeated trial and error. We will carefully identify where potential lies, while also considering the acquisition of external boosters through M&A.

Page 34. As part of efforts to strengthen the group's management foundation, we will integrate J.Front Design & Construction and PARCO SPACE SYSTEMS in March next year. The two companies together now generate a business profit of JPY 4.3 billion, a significant increase compared with several years ago. In addition, each company maintains a high ROIC of 13.0% and 13.4%, respectively. By integrating their business resources and expertise, we will establish a structure capable of consistently providing value-added spaces for luxury hotels, luxury brands and commercial facilities from design and interior finishing to electrical equipment and building management.

Page 35 covers the enhancement of productivity. We have long built our strength on cost management. While we have no intention of abandoning this strength we believe that the company's future growth should be driven not by expense reduction, but by top line expansion. Wherever possible, we will use systems, digital tools and AI to automate and improve efficiency. At the same time, we will develop foundational strategies to increase productivity per employee, not by reducing the denominator through cutting head count, but by expanding the numerator through growth in gross profit.

Finally, on Page 36, I would like to note that our performance continues to be susceptible to external factors such as current exchange rates and stock market trends, which may understandably cause concern. Personally, I will continue to focus on what needs to be done from a medium- to long-term perspective without being overly swayed by short-term fluctuations. We remain committed to realizing our vision of becoming a value-creating retailer, and I ask for your continued support moving forward.

This is Shigeoka from Daiwa Securities. I have two questions. The first point is that the downward revision to the full year plan was larger than I had expected in terms of business profit. Why the shortfall in the first half is partly due to the sales and perhaps unavoidable. The downward revision amount to JPY 1.8 billion in the first half and JPY 3.6 billion for the second half. This results in a total reduction of JPY 5.5 billion from the original full year plan. Could you elaborate on the major factors contributing to this JPY 3.6 billion downward revision for the second half with breakdown by business segment?

I think the breakdown is shown on Page 15. But if you look at the increase and decrease in business profit for the second half compared to the forecast for April, it does not add up to JPY 3.6 billion. Essentially, the main factors seem to be department store sales falling short of targets sales being weaker than anticipated and upfront costs incurred in the financial business and other areas. Can this be explained simply as sales being tougher than projected? Or are there other underlying issues? It was a bit long question, but I appreciate the explanation more in details.

Let me answer your question. My explanation is based on Page 15. Indeed, the situation for department store business in the second half, including inbound sales for -- to some extent, is somewhat challenging. The strong performance in the first half was significantly boosted by the positive effects of Daimaru Umeda store and Expo.

However, since the Expo ended yesterday and the previously striving Umeda store is now undergoing partial renovations, a considerable backlash is expected for the department store. Another area with significant negative impact is the payment and finance segment. Starting this fiscal year, we have effectively launched new cars for PARCO and Hakata Daimaru and GINZA SIX beginning last year. While issuing these cars, acquisition costs have temporarily increased.

Our policy is to steadily increase customer membership in this fiscal year to drive revenue and profit in subsequent years. As you pointed out, even if we add all these items together, the total negative amount isn't particularly large. However, the amount for the second half and the consolidation adjustment has increased significantly compared to the April announcement with the actual difference swing by JPY 2.5 billion.

The main points are as follows: first, the holding company's stand-alone administrative expenses have increased. This expansion is partly attributed to preparation for future growth. Second, upfront cost for potential future investment projects have already been factored into the second half of this fiscal year. This cost will be reversed in the second half if the investment do not materialize.

Furthermore, and other, the consolidated adjustment component has expanded due to the user breakdowns.

Thank you very much. So this consolidation adjustment is quite large and largely involves upfront investment. Should we view this as temporary one as upfront investment-related expenses rather than a general increase in operating cost?

Yes, you can think it as primarily a temporary increase. Of course, some ongoing expenses are included in the nonconsolidated administrative expenses, but we continue to manage this area in the second half, while keeping in mind the need for adjustment in the next year and beyond.

Understood. As a follow-up, I think sales at the official Expo store may have exceeded the plan quite a bit. For September and October, there was somewhat the last-minute rush in purchases, as well as the collaboration with limited edition items. I got the impression that items with good profit margin sold well. Taking all this into account, this is reflected in current plan figures, it appears that the impact is also included in the Q3. And in fact, they had a very strong impact on the first half of all. So should we see that you expect a reaction decline in the second half?

This is [ Monemuri ]. We cannot provide the detailed figures for the Osaka/Kansai Expo official store. But since the beginning of September, we have seen exceptionally strong performance. We are factoring this momentum into our projections for the shortfall or rather the target we must achieve in the second half.

As a result, we expect the actual figures to be slightly higher than what we had anticipated. As reported in the media, the recent numbers in the past few days have been quite substantial. We would appreciate it if you could understand this as a slight upward deviation from our initial projections.

My second question regards the SG&A expenses for department stores. You said that you expect a slight increase over the plan, accounting for factors such as increases in commissions and outsourcing costs. Should we assume that there is little room for further cost containment through internal efforts in the second half? In the first half, inbound sales were a little tougher than expected. And I wonder if you shifted the gears slightly to adjust I was expecting the impact will be more pronounced in the second half as adjustment will take some time.

But now I'm wondering if it's better not to focus too much on this point. Aria, the President talked about the improving productivity. Rather than cutting cost, he emphasized the importance of increasing productivity and improving efficiency.

So could you please share any short-term measures you can implement or areas where you might find room for improvement in your current plans?

Department store SG&A expenses, including measures to reduce them in the second half was your question, I think. First, as a preliminary measure compared to the year-on-year change in SG&A expenses in the first half, second half will naturally be lower because of the measures implemented in the first half. Regarding short-term cost reduction, we intend to cut over hundreds of millions of yen in a robust manner.

However, as you mentioned at the outset, structural increases, such as higher commission rates require careful mid- to long-term effort. This involves enhancing the value of our store spaces and working with some of our partners to enhance the value of the space. Therefore, while it may differ slightly from a pure short-term perspective, we have already begun implementing these initiatives.

Beyond the short-term measures for cost reduction, we are aiming for longer-term initiatives, such as cost reductions through digital transformation, particularly at the headquarter level. As Mr. Ono mentioned earlier, we will raise base revenue, but we also want to consider how we can raise them efficiently with the current workforce.

This is Yamaoka from Nomura Securities. I have two questions as well. The first point is a follow-up question. Please allow me to stick to the same topic. But in terms of your company's overall approach to expenses this fiscal year, particularly concerning the adjustment mentioned earlier for Daimaru Matsuzakaya department stores, is this based on the adjustment that certain expenditures should be made for the future?

At the start of the fiscal year, I think you told us to put a focus on short-term profit, while also keeping the future in mind. President Ono, would you share your perspective on this matter again?

Yes, I will answer your question. Naturally, in corporate management, we must strike a balance between making upfront investment to achieve mid- to long-term growth and delivering near-term performance results. What is different from our initial assumption is that, as mentioned earlier, regarding consolidated adjustment, the project we are now pursuing include those with high certainty of future growth.

This includes factoring in the associated expenses that will arise. I hope I understand this point. Personally, I recognize that while this involves both accelerating and applying the rates, as mentioned earlier, we must also push forward with reducing costs in areas where further costs cuts are possible. I believe this is necessary and achievable. Therefore, working closely with the president of each operating company to strengthen management. We intend to address this thoroughly during the current fiscal year.

Sorry. But regarding this point, I'd like to ask a follow-up question about the Daimaru Matsuzakaya department stores. I see that increases in outsourcing costs and the commission fees and increased commissions have been highlighted in your graphs. And there were questions about them earlier. Given the current structure, for example, with the success of expo-related, do you regard this cost increase inevitable ones, do you mean that it can be helped?

As you say, if expo sales are strong, the fees and commissions will rise, this can't be helped. So we compose profit margins accordingly. On the other hand, we also don't believe that this general price increase should simply be accepted as is. We recognize that there are areas where we can lower costs through our own efforts, as mentioned earlier, and areas where we must reduce costs through discussions with our business partners.

I understand. My second point concerns the outlook for next fiscal year and the year after. In your explanation earlier, you mentioned both the ability to achieve solid results next fiscal year and the need to look a little further into the future.

At the beginning of the fiscal year, I believe the total business profit was originally JPY 56 billion. But what was your original plan for the next fiscal year? I think the profit margin has dropped a little this fiscal year, but I would like to know how we should think about the next fiscal year and beyond.

For the next fiscal year, our operating profit target is JPY 56 billion, as indicated by the fact that we did not mention this target this time. We intend to continue our efforts to achieve this target. The factors are steadily being prepared, including progress in real estate sale preparations. Of course, the impact of the opening of HAERA mentioned earlier and the maximization of the impact of past investments centered on Matsuzakaya Nagoya and Shibuya PARCO.

Moreover, as noted earlier, there is the reactionary effect of onetime expenses associated with JFR card and monetization of new members this fiscal year will also come into play. Based on these assumptions, we have already begun considering at a fairly early stage what additional measures need to be implemented during FY 2026, and we intend to proceed while maintaining this overall direction.

However, a strong sense of uncertainty lies in inbound demand or rather foreign exchange trends. At this stage, it's quite difficult to completely shake off the fact that we remain subject to these influences. We had set a target of JPY 130 billion in department stores, duty-free sales for FY 2026. But we believe it is necessary to carefully assess how this situation will unfold over the remainder of this fiscal year.

I am Kanamori from Nikko Securities. I have two questions, though they are not exactly major questions. First, regarding the developer business segment, the upward revision in the first half profit was substantial. On the other hand, the second half forecast is unchanged.

Looking at the tax, I think both J.Front City development and J. Front Design & Construction performed strongly compared to the initial first half plans.

The question is the sustainability of that performance. For J. Front Design & Construction, forecasting is admittedly challenging if this is tied to construction projects. However, we can see some factors such as the first half being boosted by in-house projects, suggesting the second half might not have so much. So sustainability is a question. At first glance, the second half seems cautiously projected. I would appreciate an explanation on this point.

This is Nagamine. Allow me to answer your question. As for the developer segment, urban development results fluctuate from year-to-year depending on the sale and purchase of properties as you mentioned, we have received orders for construction work at different design and construction work at J. Front Design & Construction and PSS. Furthermore, we currently have projects underway for the second half.

Therefore, I believe we will steadily reap the benefits in the second half. In this sense, we will continue to make progress as planned, and we will manage our full year performance or rather deliver performance for the second half so that we do not lose any of the favorable results for the first half.

To add a little more context to what you mentioned, especially in the interior development business. It is true that sales from department store renovation projects are indeed significant. But the clients are not the department stores themselves, but rather the tenant businesses within those department stores.

Although I only have the figures for J.Front Design & Construction at hand, the percentage of sales to outside customers exceed 80%. So I believe this is a very important business for us, as it enables us to increase external earnings, while generating clear synergies within the group.

If we consider that 80% of external customers in the second half are tied to the internal construction work then the second half will see a decline in profit because there will be no major renovations. Next fiscal year, we'll see some activity. So I'm not sure if this will be offset by the area of the Sakae landmark in Nagoya. However, can we expect to see a stronger performance here in the next fiscal year with Shinsaibashi PARCO and other facilities?

I touched on this briefly earlier, but businesses such as J.Front Design & Construction and PARCO SPACE SYSTEMS also handle projects for external clients. In short, the work on luxury hotels and luxury brand shops as well. We managed the process in this area with a stacking table of projects and properties. There are not so many projects in second half compared to the first half. However, at this point, we can see projects of reasonable scale in FY 2026 and beyond. That is why we are making this forecast.

I understand. One more question, and this is a very minor one. Regarding the projected loss on disposal of fixed assets between business profit and operating profit, I believe it's increased in the new plan. Could you tell me where this figure comes from?

For the second half, we anticipate a new loss on disposal of fixed assets in Umeda. The increase is due in part to the rise in construction costs as work progresses. And we are projecting an additional JPY 1.5 billion in this area.

Thank you. If you are referring to Umeda, when is the peak of this loss on disposal?

I would say that the peak of the loss on disposal will be between FY 2026 and 2027. Therefore, we are looking at JPY 1.5 billion for FY 2025. And from there, we expect a slight downward push into FY 2026.

I would appreciate learning more about the details of Umeda's impact at another time. Thank you.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]