Zozo Inc Ord

It is time. So let us begin. So it's FY2024, four-year earnings briefing. Today's session is being live streamed only. And this session will end at 5.40 and from 5.50, we have a different Zoom channel on which we will be holding a Q&A session for institutional investors. Let me introduce today's participants, presenters, the President and CEO, Kotaro Sawada, as well as Executive Vice President and CFO, Kojiya Nagisawa. Thank you. So we have two presenters for the session today. Our CFO will take you take it from here. So today I will take you through the FI 2024 four year results. The presentation materials have been uploaded to our site, so please take a look. Let me jump right in and introduce the FI 2024 results. The FY2024 four-year GMV increased by 7% year-on-year, landing at $614.3 billion. The GMV excluding other GMV increased by 7% year-on-year, ending at $574.6 billion. OPM increased by 7.8% to $64.7 billion. And the OPM was 11.3%, up by 0.1 point year-on-year. Against our corporate plans, we achieved 100.4% of the other GMV excluding other GMV and 100.9% of the OP. We experienced a very long summer and lack of inventory during the fourth quarter sales season. Thus, the GMV excluding other GMV for GMV did not meet our expectations, but line and hook commerce significantly overachieved our plans due to active and effective promotions. Therefore, the GMV overachieved our initial plan. We also overachieved our plans for OP mainly due to the higher than expected operational efficiency within our logistics centers as a base, which has resulted in cost reductions for logistics center payroll. We booked record high results for both GMB and OP. The profit attributable to owners or parents increased by 2.3% year-on-year. Compared to the OP, it has grown at a more moderate pace. However, this was due to a reactionary effect from the previous fiscal period during which the company benefited from tax credits primarily as a result of successful sustainability initiatives. Despite this, the company has still met its financial targets. On page 8, here are the consolidated results for the fourth quarter. GMV excluding other GMV for this quarter increased by 3.9% year-on-year. Especially during the January-February sales period, many brands had a hard time facing a lack of sales inventory, and we were likewise impacted by the situation, so the year-on-year growth rate was sluggish. is primarily due to an increase in provisions for year-end bonuses and proactive investment in promotional expenses aimed at achieving the full-year GMV target. The OOP resulted in a year-on-year profit decline by negative 9.6%. The OPM was 9.1% down by 1.4 points year-on-year. Now let me take you through our results in more detail. If you turn to page 9, here is the increase-decrease analysis of the OP. From 60.07 billion last fiscal year, the OP increased by 4.68 billion to 64.75 billion. These factors contributed to the fee increases. Therefore, the GMV for the Zousan business and Lanyi Food Commerce contributed to a gross profit increase of 11.55 billion. The advertising business grew, contributing to 1.47 billion. Thirdly, the change in the shipping policy resulted in an increase in shipping revenues and gross profits by 3.97 billion. Lastly, although expenses for taxes, public dues, and utilities increased, this was offset by a decrease in one-time expenses such as operational equipment associated with the start of operations of the base Tsukuba 3. Therefore, other expenses decreased, adding 0.18 billion to the OP. On the other hand, the following factors drove the decrease in OP. First, This cost rose driven by increased provisions for year-end bonuses, a larger workforce, and addition of new logistics centers, resulting in negative 5.44 billion. Variable costs increased, including those that rise in proportion to the growth in transaction volume and higher shipping expenses, resulting in negative 3.93 billion. Lastly, actual PR-related costs, including advertising promotion activities, rose, resulting in 3.12 billion. On page 11, you will see the changes in cash flow. Cash flows from operating activities improved due to factors such as an increase in profit before income taxes, a rise in depreciation expenses, and a smaller increase in working capital. Cash flows from investing activities during the current fiscal year reflect expenditures for DPL Tsukuba Chuo-related investment and equipment upgrades at existing logistics centers. Cash flow from financing activities reflected an increase in dividend payments. On page 22. These are the SG&A expenses. The SG&A expenses as a percentage of GMV was 23.2%, up by 0.3 points year-on-year. The SG&A increased due to the following four factors. One, the AOV increased year-on-year. However, we accepted Yamato's price increase from April 1, 2024. The shipping expenses increased by 0.3 points. Secondly, due to an increase in provisions for year-end bonuses associated with achieving the initial targets for GMB and OOP, the employee-related expenses within payroll increased by 0.2 points. Thirdly, we started paying rent for logistics centers, Zozo Base Tsukuba 3 and DPO Tsukuba 2. Therefore, the rent went up by 0.1 point. And lastly, we have incurred depreciation costs from material handling equipment for the full year. Thus, the depreciation costs increased by 0.1 point. The SG&A decreased for the following two reasons. Due to improved operation efficiency through inventory optimization at logistic centers and labor reduction via automation initiatives, logistic-related personal costs have decreased by 0.3 points. Other expenses declined as a result of reduced one-time costs, including operation equipment, which were incurred in the previous fiscal year in connection with the launch of Social Basic by 3. This resulted in a decrease of 0.2 points. Now on page 24, you will find the SG&A expenses by quarter. In the fourth quarter, the SG&A expenses as a percentage of J&V was 24.7%, up 1.8 points year-on-year. As was the case in the second and third quarters, the operational efficiencies in the logistics centers improved Therefore, the logistic expenses as a percentage of GNV has been relatively lower than the same period fiscal year. However, as we already mentioned, we provided higher year-end bonuses, so employee-related personal expenses increased. And we also spent more on customer acquisition promotions. And we also incurred temporary expenses in relation to the M&A of lists. Therefore, the SG&A expenses as a percentage of GMV for this quarter has increased. On page 25, here are the trends in actual promotion-related expenses. As we already mentioned, this quarter we used 4.8% of the GMV as actual promotion-related expenses, which includes both advertising expenses and point-related costs. The reason why this has gone up by 0.8 points since the same quarter previous year is because we proactively use the promotional budget we had not used by the end of the third quarter to help support sales. But for the full year, the actual promotion related expenses as a percentage of JV was 4.1%, nearly on target with our initial plans. On page 26, From here, I will take you through Seoul Town's KPIs. The annual buyers increased by 150,000 from the previous quarter to 12.21 million. The active members increased by 190,000 from the previous quarter to 11.4 million, and guest buyers decreased by 3,000 from the previous quarter to 110,000. This quarter, like the GMV, due to the impact from the lack of sales inventory in January and February, we found it challenging to acquire new members. That said, we proactively ran acquisition campaigns such as web ads in March onwards, and because the spring-summer demand increased, recent new member acquisitions have been trending well. Now on page 21, number of shops. The number of shops as of the end of this quarter was 1,649 shops. So the net decrease was seven shops. The new shops we welcome. 28 new shops this quarter, including SexySei and Visee operated by Kosei, and also Tom Ford Beauty operated by Estee Lauder companies. We have achieved our new shop targets this year, but since many brands left our platform due to brand closures, the number of shops have decreased quarter on quarter. On page 31, you will find the average retail price. Average retail price was 4,038 yen, up 0.9% year-on-year. As I have already mentioned, many brands suffered from lack of inventory during the sales period in January and February, and possibly due to concerns about early stock-ups, the discount rate declined compared to the same period last year. As a result, the average retail price was positively impacted, ending slightly higher year-on-year. On the other hand, on page 32, you will find the average order value. This was 8,980 yen, up 2.8% year-on-year. The increase in the number of items purchased per order led to a higher growth rate in AOV compared to the growth rate in average retail price. This increase in items per order was primarily driven by a more frequent implementation of free shipping promotions for purchases over 12,000 yen compared to the same period last year. As a result, the promotion of bundle purchases rose particularly on days when the promotion was running. Next, I would like to take you through our FY2025 plans. On page 34, here are the consolidated business forecasts for the current fiscal year. With the acquisition of lists, the amortization of goodwill, and related expenses expected to increase and impact operating profits thus from this fiscal year, we will begin disclosing EBITDA and EBITDA margin. By excluding non-cash items that occur on a recurring basis, we aim to provide a clearer picture of our actual earning power following M&A activities. We expect the GMV to increase by 1.5% year-on-year to $623.6 billion. GMV excluding other GMV is forecasted to increase by 5% to $603.4 billion. Net sales is expected to increase by 5.1% to $224.1 billion. OPA is expected to increase by 7.8% to 69.8 billion. OPM is forecasted at 11.6%. EBITDA is expected to increase by 0.2% to 76.9 billion. And the EBITDA margin is forecasted at 12.7%. So these are our plans. The standalone business impact of list has not been included in these consolidated forecasts, and its impact is still being reviewed. Once the BVA is completed, we plan to promptly disclose any revisions to the consolidated forecast. Next, moving on to page 15, here are the changes in the dividends per share and the payout ratio. On April 1st, 2025, we implemented a stock split at a ratio of three shares for each one existing share. The dividends here that you see is after these shares have been split. The dividends per share for FY2025 is forecasted to be 107 yen. For the current fiscal year, we will continue to target a dividend payout ratio of 70% or higher with dividends per share of 39 yen. Here are the targets by business segment. This is page 35. Regarding Zototown, we will continue to focus on increasing the number of buyers and increasing Zototown's share of fashion spending to achieve continuous growth. With Line Yahoo! Commerce at the moment, the level of promotions Line Yahoo! will be conducting is to be confirmed. However, we would like to approach line users via Yahoo! Shopping and acquire new ZOTOTAN users through this channel, thereby growing this segment by up to 10%. As for B2B business, we estimate this to decrease by 35.2% year-on-year, but this takes into account the fact that our support for two high-revenue brands will come to an end. And ask for other GNV. We intend to seize recognition of GMB from Zozo option contract stores on Zozo Yahoo Shopping from the second half of the year. Thus, it is expected to significantly decrease by 49.1%. That said, as I've already explained in the past, the GMB from Zozo option does not directly impact profitability. So Zozo will continue to place importance on GMB excluding other GMB. And The growth rate, including other GMV, was 1.5%. That was the growth rate, but this is due to this factor that I just mentioned. Lastly, I would like to explain about the two announcements we have made today. Our group's policy on shareholder returns is to consider and implement such returns in a balanced manner with internal reserves, taking into account comprehensive account our business performance, financial position, and future business and investment plans. On October 31st, 2023, we announced a new shareholder return policy, saying that we aim for a total payout ratio, including share buybacks, of over 80% on a five-year average basis, starting from the fiscal year ending March 2024. In line with the policy, we have continuously reviewed the possibility of share buybacks, taking into consideration factors such as stock liquidity and market trends. As part of our efforts to achieve our total shareholders return target, we have decided today to implement a share repurchase. The repurchase will be conducted through market purchases with an upper limit of either 10 billion or 10 million shares. The scheduled repurchase period is from May 1 to September 1, 2025. In addition to the share buyback, we have also decided to cancel a portion of the Treasury shares we currently hold. We will be canceling 9.39 million shares on May 9, 2025. So that concludes the results for this fiscal year. Sawada will take it from here. So let me share with you some supplemental information. Last year, we shared this with you, the growth target for the future. So we mentioned 800 billion in GMV. so we're already at 560 billion and our active members have gone from 12 to 13 million so we will we'd like to continue to aim to hit these goals moving on these are the growth drivers i already talked about this last year as well but from as a zozdan business we want to attract a broader range of customers and also improve the frequency of purchase per customer. Thirdly, we want to continue to support brands in terms of production and also add new categories after cosmetics and also monetization of technology. So these are the five growth drivers, and I would like to take you through the progress of each. First, attracting a broader range of customers. Last year, we continued to focus on promotions for the younger target, younger audience, and ASEA that you see on the left, which these are events for K-pop office. We have been sponsoring these events for K-pop art fans, and it's been doing well, especially for women. I think this was a good way to approach younger female audiences. And in order to buy these tickets, they had to sign up for a Zototan account. So it's a little bit different from the digital promotions effect, but we have been able to acquire new acquisitions, new customers through different agencies. These are the results as well. These are some of the KPIs that we've been able to capture this graph. We as consumers, we surveyed women aged 15 to 59. When you think of buying fashion products, what site or service comes to mind? And we conduct the survey regularly. And as you can see, this is a town from last year. This includes offline shops as well, but we're the number one service that they think of. So we want to get people to come to the site and also work on our recognition and favorability. So we're doing well on both fronts. So we want to continue to increase this index going forward. Moving on to a premium frequency of purchase per customer. Here as you you get have access to a lot of information but air agent is of course quite popular it's in it's much talked about so it's not just our searches we want ai agents to help people discover clothing so we're working on that right now of course we some people may be thinking how useful is a category killer how effective but We want to use generative Ai and Ai agents as well to become a category killer within the fashion industry I think there's still a lot of room for growth, a lot of potential so we're focusing in that area. One of the outputs here is this one of the outputs you see here we revamped where. So we had fashion genre assessment, and this enabled us to get a lot of new users. And we're seeing a lot of traffic to Zozotown. But we're using AI agents to analyze fashion, utilize this database to utilize these insights to do more personalized recommendation. So we've gotten taken this a step further. And so we want to continue along this path and develop a fashion agent in the near future. In addition to that, we talked about where already but in the same group, we have a very important part channel line. So we want to utilize the line as a channel and implement the fashion ai agent to line to continue to address a wide range of users have at another contact point with our users potential users thirdly production support we are Actually, manufacturing more SKUs and more volume as well. The more volume we basically, volume means sales for us, but the total number of items produced rose by 17.8%. And we don't want to only just make normal clothes. We want to We have been manufacturing clothes that are dedicated or especially made for people with challenges. And this is made to order. So it's very sustainable. There's no waste. So it's a very futuristic initiative. And we believe that we can continue. to increase the number of SKUs and items produced. It doesn't have a significant impact on our performance yet, but we want to continue to increase the number of SKUs and items that we produce. Fourth one, expansion of the cosmetics category and the next step. With cosmetics, as you can see, GMV grew by 30% year-on-year. So currently, it's at 14.7 billion. This includes sales on Yahoo Shopping as well. So it's becoming quite a significant presence now. It is one of the largest cosmetic malls in Japan now. But we want to further accelerate our efforts. So we're thinking of different promotional initiatives. And we've been doing cosmetics for three years, four years now. we're learning from apparel business and of course we have the systems and logistics centers and we've used the same system and logistics center for apparel to cosmetics but when adding new genres we want to do this a little bit more quicker so over the last year we're We're trying to make participation a little bit lighter. It's not too heavy. So to sell, we want to make it a little bit easier to just joins of the town. So this system we've been working on over the last year, and it's going to be finalized this fiscal year. And last year, we talked about this in one of our press releases, but Korean fashion mall, the largest, Musinsa, we're going to be partnering with a company. So we're prepared to start our partnership. So we will be adding Korean fashion to our fold, to Zozotown, provided by Musinsa. And Musisa has a couple hundred billion GMV, so we will be able to add a lot of fashion very quickly. So logistics and duties, that's quite complicated, but we want to make it very easy for these kind of players to join Zozotown. And Musisa is focused on fashion, but we would like to also welcome other category partners like furniture, for example, so we have now the framework in place to add more categories more quickly so. We will be, we would like to add more categories going forward very quickly if one is the. Monetization of technologies and going to the global market. So we already offers us a fit. We've talked about that in the past, but it's going well. As but. It hasn't. It doesn't have a significant impact on our overall performance, but as we've already announced in our press release, we have acquired list. So. CFO Yang said, I will talk about this in more detail later. And this is the last page that I will be covering. These are external evaluation of our company, especially around sustainability. And I'm not going to be able to cover each and every one of this, but many of these companies, our indexes are praising our efforts. So please just take a look later. And then within the remaining time, Yanagisawa would like to take you through the acquisition of lists. So April 9 we disclose that we have acquired this, so let me take you through some of the fine points. There are four agenda topics versus global strategy overview list the future created by both companies and then the transactional structure is a loss agenda topic. First, our corporate philosophy is inspired the world deliver joy every day. So it reflects our ongoing ambition to expand globally, an ambition that has been both seen both challenges and setbacks in the past for us. In recent years, we have once again began exploring overseas opportunities as part of our medium term goals. So we want to go global through technology. And as part of these, we like to go over the efforts that we have been undertaking in that regard. In recent years, our overseas expansion has been driven by leveraging the business expertise and technological assets cultivated in Japan with initiatives across both B2C and B2B. Zozometri, we have launched these kind of services, and we have also begun providing technology licenses to international. We would like to begin providing technology licenses to international platform operators, as you can see on the left. of this page, and that's when we encountered LIS, a fashion platform based in Europe. So through extensive discussions, we became convinced of the strong complementary relationship between our two companies, as well as alignment of our future visions. This led to our decision to acquire LIS. With Liz joining Zozo Group, we are now positioned to make a full-scale entry into Western markets and expand our presence in the luxury segment. These are areas we had previously been unable to reach, but now we are well positioned to do so. We believe this partnership marks the first bold step in both deepening and accelerating, evolving Zozo's global strategy. Next, we would like to explain our growth vision for the overseas business going forward. Building on the foundation of our fashion tech initiatives such as ZOZOFIT and ZOZOMETRY, as previously mentioned, the addition of LIST marks our transition into the second phase of global expansion. LIST has already established a strong ground position in user base in Western markets and achieve steady organic growth. But by strategically integrating our AI measurement technologies with this platform, we aim to simultaneously enhance the user experience and improve profitability. This will enable us to fully accelerate our expansion in the e-commerce and media domains across Europe and North America with LIS at the center. In the mid to long term, we envision positioning LIS as a core platform of our group and also we are considering strategic M&A opportunities. Through this second phase, we are committed to laying the groundwork for realizing transformative growth. Now I would like to reintroduce this. This is a global fashion shopping platform headquartered in London, UK. with services currently available across the United States, the United Kingdom, and Germany and other markets. Since its founding in 2010, this has suddenly expanded its business primarily in Europe and North America by leveraging external capital. It has established an asset-light business model that operates from the UK as a central base while covering multiple countries. Going forward, by combining this operation with our technological and data assets, we aim to further unlock its growth potential and generate synergies across the entire group. Next, let us explain this business model. Its most notable feature, similar to our own, is its asset-light structure. Well, traditional e-commerce in Western markets has a focus on inventory-based models or brand-owned online stores. This has built a performance-based model by partnering with such businesses and earning commission fees through directing traffic. Affiliate Martians. This aggregates and analyzes product data from over 27,000 brands and e-commerce sites, delivering a personalized user experience powered by AI. This enables users not only to quickly find out where and at what price they can purchase items they want, but also to discover items they might never have found on their own that perfectly match their preferences. So this unique approach to discovery lies at the heart of this competitive advantage. Currently, LISP partners with approximately 550 or over 550 retailers and covers over 27 000 brands offering a product catalog of around 97 million skus there is strong partnerships relationship with major partners primarily in europe and north america it provides access to an extensive range of product information The platform attracts approximately 160 million unique users annually, with over 2.2 million actual purchasers, demonstrating a strong and sustained presence in Western markets. Furthermore, this product line of focus is limited to high-end price range. The average order value among its major partners is approximately 63,000 yen, which is significantly higher Then goes on. So the time. From here I would like to talk about our similarities. First, both operate as a platform based models that do not hold. Inventory so we have very similar business models allowing brands to take the lead and how their products are handled. This has partner as I mentioned with. 27,000 brands worldwide, while Zozobo is one of the largest brand lineup in Japan. Both companies also emphasize strong trust-based relationships with their partners, respecting brand policies and pricing strategies. This is also another similarity. Additionally, both organizations have technology and data-driven development structures, actively investing in areas such as AI, ux enhancement so that was also another commonality it is and this is precisely because of these structural similarities that we believe that there is a high level of strategic compatibility between social endless I would like to talk about synergy now. As I explained, this and those share many similarities in terms of business model and core values. These common foundations will enable us to generate tangible synergies quickly as we move forward with integration. There are three key areas where we can expect to see concrete synergies. First is a geographical complementality on the sales front. So while Zozo has a strong presence in the Japanese market, this is well-established in Western markets, particularly in the luxury segment. By combining our strengths, we can rapidly expand our global reach. Second is the complementary... is how we complement each other around technology expertise. Integrating those capabilities in AI and body measurement with list strength and SEO and personalization will enhance the user experience in fashion commerce. Third is the benefit of economical scale. By unifying our system infrastructure and back office operations, we expect to achieve improvements in both efficiency and profitability. As outlined so far, our collaboration with LISC has established a complementary structure that brings together our respective trends in technology expertise and regional presence. By leveraging these synergies, our goal is not merely to expand scale, but to enter the next phase of strategic growth. Currently, the global fashion e-commerce market overseas faces several challenges, including excessive price competition driven by frequent discounts, overly generous benefits such as free shipping, or overly relaxed return policies. As a result, the overall profitability in the e-commerce sector overseas is declining and is becoming increasingly difficult for brands to preserve their value. In response to these market conditions, those on this aim to shift that access of competition from price experience value by focusing on AI-powered demand forecasting and personalization, user experience-driven customer journey design, and pricing and experience strategies that align with both brand and consumer expectations. By doing so, we want to shift the axis of competition from price to experience value. Through this approach, we aspire to evolve fashion e-commerce from a place where people simply buy things at a discount to a destination where they can discover the joy of fashion and express their individuality. Lastly, we would like to provide an overview of the transaction as this goes. all the necessary approvals and closing conditions were met the transaction was completed on april 18th of this year we acquired 100 of list shares through a newly established subsidiary at a total purchase price of approximately 22.1 billion the funds for this acquisition were sourced from our existing cash reserve with no external financing involved the impact of our financial performance is Expected to be reflected in the consolidated results for the fiscal year ending March 2026, as details are currently under review. To conclude, we have received a video message from Ms. Emma McFerrin, CEO of List, so please take a look.

Hello, I'm Emma McFerrin, the CEO of List, and it's a pleasure to join you today. I'm delighted to officially announce that List is now part of the Zozo Group. Together, List and Zozo share a vision to transform the online fashion shopping experience by bringing joy back to fashion discovery. We are so excited to deliver this vision together. But first, let me tell you a little about what we do. List is a leading global fashion shopping platform. We connect 160 million shoppers annually with 27,000 of the world's best premium and luxury brands and retailers through a powerful asset light model. We are based in London with a strong presence in the UK, Europe and the US, where we have nurtured deep trusted relationships with fashion's most powerful brands. We have built one of fashion's largest data sets, enabling our AI powered recommendations to create an immersive personalized shopping experience on our app and website. We also use this intelligence to create influential content like the List Index, our quarterly report ranking fashion's hottest brands and products, which has become a definitive benchmark for the industry. I know that Zozo Group is the right home for List. Both Zozo and List are leaders in harnessing technology to enhance the shopping experience. Zozo's scale, expertise and support will help accelerate the development of List's cutting-edge AI-driven discovery experience. And of course, Zozo's market intelligence and strong brand presence in Asia will further elevate the global authority of the List brand. Together, we will join forces to expand our global presence and achieve sustainable growth. On behalf of the LIS team, I'd like to thank you for your continued support, and we look forward to the exciting journey ahead of us.

This concludes our explanation.

This concludes FI2024 four-year earnings briefing course as well. Thank you for joining us today.