Message from the Executive Officer in Charge of Financial Strategy

The results for the final fiscal year of our previous medium-term management plan, the JT-2025 Management Plan, were severely impacted by the rapidly changing business environment, resulting in outcomes that fell significantly short of the targets we put forth. However, throughout this process, Joshin has focused on the efficient management of assets, starting with the optimization of inventory, as well as on reducing and disposing of crossshareholdings based on constructive dialogue with the companies in which Joshin holds stakes. Through these initiatives, we have curbed excessive bloat in asset holdings and made steady progress in strengthening our financial foundation to enhance capital efficiency.
      As a result, we have continued to maintain and strengthen our solid financial stability. In particular, in the area of cash flow, Joshin’s consistent implementation of various measures has led to an increase in operating cash flows and a major improvement in free cash flows. This has enabled us to reduce our net interest-bearing liabilities (debt reduction), which had previously been on an upward trend, and we are making progress in shifting toward a sound financial structure in preparation for the next stage of growth under the new medium-term management plan, the JT-2028 Management Plan (hereafter, the “New Medium-Term Plan”).

      As indicated in the title, a priority issue for Joshin is that capital efficiency remains low, as represented by ROE (return on equity).
      Since the majority of invested capital in the retail industry is concentrated in stores, a decline in the profitability of store assets directly leads to a deterioration in capital efficiency.
      Impairment losses on assets whose profitability has declined significantly are a major factor weighing on profits.
      Gains from the disposal of idle assets (including crossshareholdings) do not directly contribute to improving recurring earnings power, and impairment losses are one factor hindering the stabilization of bottom-line profit levels. (See below)

In pursuing the maximization of capital efficiency, ensuring robust financial soundness is an indispensable prerequisite.
     To implement our New Medium-Term Plan, we will thoroughly adhere to the following three financial policies to drive sustainable value creation.

Joshin has established a sound financial base, generally maintaining an equity ratio of approximately 45% and keeping our net D/E ratio under 0.5.
      Moving forward, we will continue to maintain the financial stability that serves as the foundation for the Company’s sustained growth.
      In particular, we will focus on shortening and improving the CCC (cash conversion cycle) and optimizing inventory levels, which is directly linked to controlling working capital and net interest-bearing liabilities.
      Through these efforts, we will continue to practice efficient asset management that enhances the overall quality of our balance sheet (B/S).

During the New Medium-Term Plan period, we will use operating cash flows generated from our business activities as our primary funding source and achieve an optimal balance (allocation) between “proactive growth investments for the future,” which contribute to the sustainable enhancement of corporate value, and “highly effective return of profits” to shareholders.
      Under the New Medium-Term Plan, we will strike a balance between proactive investments that contribute to future business growth, based on operating cash flows generated from our business operations, and shareholder returns.

Joshin is clearly formulating a sustainable value creation story and translating it into concrete business initiatives as part of our commitment to management practices that are conscious of cost of capital and stock price.
      We will continue to further deepen our two-way engagement (dialogue) with our shareholders and investors and, by meeting market expectations, we will strongly advance our management efforts toward achieving a PBR (price-to-book ratio) of over 1 as soon as possible.
      In particular, with an eye toward the implementation of the new lease accounting standards scheduled to take effect in the next fiscal year, we have begun implementing measures such as reducing property, plant, and equipment as part of structural reforms in store management, as a core initiative to improve capital efficiency.
      While controlling the expansion of assets resulting from their recognition on the balance sheet, we will actively work to further strengthen our balance sheet (B/S) and improve asset FY2024 results FY2025 plan FY2025 results efficiency.

With regard to capital allocation under our New Medium-Term Plan, we are planning a strategic allocation of cash based on the assumption that we will generate cumulative operating cash flows in the range of ¥35 to ¥40 billion over the three-year period. Under the previous Medium-Term Plan, the cumulative total of operating cash flows was approximately ¥32 billion over the three-year period, and compared to the degree of achievement of business performance targets, cash generation capability has steadily improved. Moving forward, we will further accelerate investment in future growth domains by leveraging this strengthened cash generation capacity, combined with appropriate financial leveraging. As for the specific allocation, we will prioritize directing approximately 70% to 75% of the cash generated toward investments centered on our growth strategy, including the strengthening of existing businesses, M&A, and the expansion of service infrastructure.
      We will also actively pursue intangible investments in areas such as human capital, systems, and DX that are treated as cash outflows and recorded as selling, general, and administrative expenses (SG&A), viewing them as upfront investments that ensure sustainable business growth in the future.
      By optimizing the balance between these growth investments and shareholder returns, and by thoroughly implementing disciplined capital management, we will strive to maximize capital efficiency.

To optimize our net assets, the cornerstone of capital allocation, we are promoting in-depth discussions from an accounting perspective and implementing appropriate strategies for closing and replacing stores, in addition to our regular reviews.
      Strengthening the profitability of our businesses on an optimized net asset basis directly contributes to the sustainable growth of EPS (earnings per share).
      We believe that this sustained growth will raise market expectations (confidence in future growth) and ultimately lead to a boost in PBR through an increase in PER (price-earnings ratio).
      Based on this financial logic, under the New Medium-Term Plan, we will shift toward management that prioritizes capital efficiency and implement various measures, including more efficient store management.

• Share buybacks (Implementation of a flexible capital policy that takes market liquidity into account)

Since the number of our issued shares is relatively compact at 28 million shares, we do not set a uniform, constant acquisition limit. Instead, we implement a flexible capital policy that comprehensively considers market conditions and liquidity.
      In light of the recent trend toward the unwinding of crossshareholdings, should a significant block of shares be released onto the market, we will prioritize the interests of our existing shareholders, such as preventing dilution, and consider and implement flexible share buybacks as appropriate.
      (Number of treasury shares held as of the end of FY2025: approximately 1.45 million shares; ratio to the total number of shares issued: approximately 5.2%)

• Dividend policy (Optimal returns making best use of financial soundness and flexibility)

Enhancing shareholder returns is one of our most important management issues, and we will continue to strive to maintain and improve our optimal level of returns.
      By leveraging the appropriate size of our share base, we will implement a flexible and effective dividend policy that responds to our business performance trends while minimizing any sudden strain on the Company’s cash flow.

• Reduction of cross-shareholdings (Improving capital efficiency and advancing corporate governance)

     In accordance with the policies disclosed in the Corporate Governance Report, we are rigorously verifying the reason for holding shares and engaging in constructive dialogue with the companies in which we hold shares, and are progressively selling the shares for which agreement has been reached.
      In FY2025, Joshin recorded approximately ¥1.6 billion in gains on the sale of investment securities from the sale of crossshareholdings and shares held for pure investment purposes, which contributed to an increase in net income for the period.
      Moving forward, with the aim of further improving capital efficiency and under a policy of, as a general rule, not acquiring any new cross-shareholdings, we have put forth a target of reducing the ratio of cross-shareholdings to net assets to “less than 3% in three years” and will accelerate the reduction of these holdings.

     To achieve sustainable corporate management, Joshin is building an optimized business portfolio and actively making growth investments to support it. As a fundamental premise, we will emphasize ROE (return on equity) and ROIC (return on invested capital), which are company-wide management indicators, and rigorously make investment decisions with an awareness of achieving returns that exceed the cost of capital.
      Moving forward, we will continue to work with the Executive Officer in Charge of Sales Strategy and roll out active investments with disciplined and efficient management as a fundamental premise.
      In addition, since the previous fiscal year, we have been implementing full-scale initiatives aimed at the effective utilization (optimization) of our store assets, which account for the majority of Joshin’s property and equipment. Specifically, leveraging our extensive network of relationships with financial institutions, securities firms, and other partners, we are promoting alliances (such as store-to-store collaboration) with various retailers beyond the home appliances sector. Through these efforts, we will maximize the asset value of our existing stores and strive to improve our total asset turnover ratio and further enhance capital efficiency.

Through IR activities tailored to the attributes of domestic and international investors, Joshin is working to acquire a diverse body of “fan” shareholders.
      As a result, the number of unit shareholders as of the end of March 2026 stood at 24,685, growing by 1,890 people from the previous fiscal year, marking a steady rise.
      Most of this increase in the previous fiscal year was from overseas investors, and we recognize that their contribution has been significant, including their role in improving our PBR. We believe this is the result of our consistent, steady engagement efforts, such as the thorough simultaneous disclosure of information in English and the conduct of individual investor relations meetings, both face-to-face and online.
      By leveraging the strengths of the retail sector, which is closely tied to consumers’ daily lives, we have kept the proportion of shares held by individual shareholders stable at over 20%.
      Furthermore, we are engaging in ongoing constructive dialogue with securities analysts to stimulate a better understanding of Joshin’s unique characteristics and differentiation strategies. We will utilize this market feedback to implement management strategies that are conscious of the cost of capital and our stock price.
      Starting in FY2026, in anticipation of the full-scale TOPIX review, we are proceeding with the reduction of our crossshareholdings and the sale of our fixed holdings on the market. Through these measures, we will focus on improving share liquidity in parallel with boosting our stock price. Going forward, as a company listed on the TSE Prime Market, we will continue to pursue an optimal balance between growth investments and shareholder returns with due regard for capital efficiency. We will also further intensify our investor relations (IR) activities, and strive to be selected as a target for medium- to long-term investment.