Earnings Call: Q2 2027

Oct 13, 2026

Summary

H1 sales grew 2.5% YoY, while business profit declined but exceeded April’s forecast. FY guidance now targets record business profit of ¥53.5bn, supported by department-store strength and higher duty-free sales, alongside ongoing renovation and cost pressures.

Afternoon. I am Takamasa Nagamine, Senior Executive General Manager of the Financial Strategy Unit of J. Front Retailing. Thank you very much for joining us today despite your busy schedule. I will begin by explaining our first half FY 2027 results, followed by our outlook for the second half and full year FY 2027. Consolidated gross sales for the first half totaled JPY 638.2 billion, a 2.5% increase year-on-year, driven by the solid performance in our core department store and SC segments. Business profit was JPY 26.5 billion, down 5.6% year-on-year due to the impact of sales floor closures linked to major renovations of Daimaru Umeda and absence of last year's Expo-related sales boost. However, owing to cost containment and the timing differences of expenses, business profit exceeded the April forecast by JPY 4.5 billion. As a result, while operating profit and profit attributable to owners of parent declined year-on-year, both exceeded the levels announced in April. Next, I would like to explain performance by segment. First, in the department store segment, we face several factors weighing on revenue this fiscal year, including the impact of sales floor closures due to a major renovation project at Daimaru Umeda, which began last autumn, and absence of Expo-related sales boost recorded in the previous year. Against this backdrop, domestic sales remained strong, led by record-breaking sales from special events for Gaisho customers. In addition, duty-free sales expanded on the back of the weaker Japanese yen. As a result, gross sales increased year-on-year. Although the business profit declined, partly reflecting the impact of timing differences in SG&A expenses, it exceeded the April forecast by JPY 2.9 billion. In the SC segment, performance remained strong. Shibuya PARCO continued to benefit from the major renovation completed last autumn, while PARCO further enhanced its distinctive offerings in pop culture and fashion. As a result, demand from both domestic and international customers expanded with inbound transaction volume increased by about 20% year-on-year, marking the second consecutive year of growth. Regarding the Developer segment, J. Front Prime Space, which operates the building, interior, and facilities businesses, faced a decline in demand following the completion of the previous year's department store renovation project. Nevertheless, through the strict control of construction and project costs, business profit exceeded the April forecast. Meanwhile, J. Front City Development reported increases in both revenue and profit, driven primarily by higher income from new properties such as the opening of HAERA. In the payment and finance segment, both revenue and profit increased, mainly driven by higher merchant fee income resulting from the continued expansion in card transaction volume both within and outside the group. Next, sales performance by store at Daimaru Matsuzakaya are shown on slide 8. Strong Gaisho and inbound sales at individual stores resulted in a 7% increase in total sales for all stores excluding Umeda, which is currently undergoing renovation. At Daimaru Umeda, despite a roughly 60% reduction in sales floor area compared with the previous year, performance exceeded the initial plan for the period. Although Nagoya store is seeing a continued negative impact from the renovation work at the south building scheduled to open next spring, transaction volume, including the luxury zone at HAERA, has performed strongly, recording a double-digit growth year-on-year since HAERA opened in June. Next, the results for the duty-free sales are shown on slide 9. Although the decline in visitor numbers from mainland China continued, sales in the luxury segment and other categories grew as average spend per customer increased, driven by the weaker Japanese yen. As a result, duty-free sales increased by double digits both year-on-year and versus the initial plan. Looking at the sales by country, mainland China still accounts for a high share of sales. However, both customer numbers and average spend per customer have grown significantly among visitors from Hong Kong, Taiwan, and South Korea. We therefore regard these as important markets where we can achieve steady growth through enhanced customer engagement and service capabilities going forward. SG&A expenses for Daimaru Matsuzakaya are shown on slide 10. Compared with the previous year, personnel expenses, advertising expenses, and other costs increased. However, through ongoing cost containment during the period, together with an impact of investment-related expenses shifting to the second half, the increase in SG&A expenses was limited to JPY 700 million, excluding the Expo-related expenses incurred last year. Compared with the April forecast, expenses were reduced by JPY 2 billion. PARCO's performance by store is shown on slide 11. As mentioned earlier, results remained strong throughout the first half, supported by renovation effect at the Shibuya PARCO, continued inbound demand, and the opening of HAERA. In addition, following the major renovation of Shibuya PARCO last autumn, Shinsaibashi PARCO is scheduled to reopen following its renovation this autumn. Next, please turn to slide 12 for the consolidated balance sheet. Total assets decreased by JPY 5.4 billion from the end of the previous fiscal year. While equity attributable to owners of a parent increased by JPY 900 million to JPY 416.5 billion, primarily due to purchases of treasury stock and other factors. Slide 13 shows the consolidated cash flow results. Cash flow from investing increased by JPY 22.1 billion year-on-year due to business investments such as store renovations and the opening of HAERA, as well as investments in the Developer segment. Cash flow from financing resulted in an outflow of JPY 21.2 billion, mainly due to repurchase of own shares. Next, I would like to explain our earnings forecast for the second half of FY 2027 and for the full fiscal year. Please turn to Slide 14. Regarding the outlook for the business environment and the macroeconomy, we must remain mindful of the risk of economic adjustment due to fluctuations in domestic and overseas economies, but we expect consumer spending to remain generally resilient. In Japan, we expect our consumption to remain firm, especially among affluent customers driven by the wealth effect. At the same time, we recognize the need to continue monitoring the impact of prices and real wage trends on consumer sentiment. Overseas, while the U.S. economy is expected to continue expanding, we believe it is necessary to remain mindful of the risk of an economic slowdown resulting from persistently high U.S. interest rates, as well as the impact on the market trends and wealth effects arising from rising interest rates triggered by fiscal concerns in various countries. Regarding foreign exchange rates, although the interest rate differential between Japan and U.S.A. is narrowing and the yen is gradually stabilizing after a period of extreme weakness, we expect the yen to remain relatively weak for the time being. Based on this business environment, we have revised upward our full-year consolidated gross sales forecast to JPY 1 trillion 360 billion, representing year-on-year growth of 5.4%, despite factors weighing on sales. This reflects continued strength in the department store segment. We have also revised the business profit upward to a record high of JPY 53.5 billion. Operating profit is expected to decrease by 6.2% year on year due to expenses associated with the store closure. Profit attributable to owners of parent remain unchanged from the April forecast at JPY 29 billion. Please refer to this slide for our outlook by segment. In the department store segment, the impact of sales floor closures at the Umeda store will continue. At the same time, we will strengthen initiatives such as customer acquisition in the Gaisho business and offsite events. Based on the first half trends and in the current outlook, we have raised our duty-free sales forecast from the initial plan and now expect annual duty-free sales of JPY 121 billion. For the SC segment, in addition to the revenue growth trend seen in the first half, large-scale renovations at Shinsaibashi PARCO and Ikebukuro PARCO have been completed, and renovation effects are expected to materialize from the second half. Accordingly, we forecast an increase in both revenue and business profit for both the second half and full fiscal year. In the developer segment, we have revised down our second half forecast from the April outlook to reflect potential delays in construction projects for external clients in the construction and interior design business. On the other hand, J. Front City Development remains on track to sell non-core properties in the second half as planned. As a result, for the full year, the developer segment is expected to achieve increases in both revenue and profit, with business profit expected to be broadly in line with the April forecast. For the payment and the finance segment, continued growth in card transaction volume is expected to drive increases in both revenue and profit, with business profit forecast unchanged from the April outlook. The sales outlook for the major Daimaru Matsuzakaya store locations is shown on Slide 19. Driven by growth in Gaisho sales and duty-free sales, stores such as Daimaru Shinsaibashi and Daimaru Kobe are expected to achieve double-digit revenue growth. Total sales for all stores, excluding Umeda, are projected to increase 8.3% year on year. At the Umeda store, although the renovation work will continue, additional renovated areas are scheduled to reopen in phases beginning next spring, following the reopening of the basement food floor. Next, Daimaru Matsuzakaya Department Store, SG&A analysis. Compared with the previous year, SG&A expenses are projected to increase by about JPY 2 billion, mainly reflecting higher personnel expenses, advertising and promotional expenses aimed at driving sales growth, IT related system expenses and utility costs. Compared with the initial plan, SG&A expenses are expected to increase by JPY 1.2 billion, primarily due in part to the carryover of sales commissions, investment expenses and other costs from the first half into the second half. Turning to the consolidated balance sheet forecast, strategic investments have been incorporated into the plan. Total assets are projected to reach JPY 1,310 billion, while interest-bearing liabilities, excluding lease liabilities, are forecast to rise to JPY 247 billion, both higher than at the previous fiscal year-end. Equity attributable to owners of the parent is expected to reach about JPY 421 billion. The consolidated cash flow forecast incorporates growth investments across each business, including store renovations, as well as strategic investments reflected in both investing and financing cash flows. Finally, regarding shareholder returns, we plan to pay an interim dividend of JPY 28 per share, an increase of JPY 1 from the previous year. We also plan to maintain the full-year dividend at JPY 56 per share, unchanged from the April announcement. This would mark the sixth consecutive year of dividend increases following the COVID-19 pandemic. As a result, the dividend payout ratio is expected to be about 47%, while the total return ratio, including the share buybacks executed during the first half, is expected to be about 82%. This concludes my presentation. Thank you very much for your kind attention. Good afternoon, everyone. I am Keiichi Ono, President of J. Front Retailing. Thank you very much for joining us today despite your busy schedules. I would like to speak about the progress of the current medium-term business plan and the broad direction of the new medium-term business plan, which will begin next fiscal year. This slide presents the conceptual vision of what we aspire to become, which we introduced when the current medium-term business plan was launched. I will not go into detail about it today. Slide 26 summarizes the progress and achievements in profit performance. The current medium-term business plan, which began in FY 2024, delivered a record high consolidated business profit of JPY 53.4 billion in its first year. In FY 2025, profit temporarily declined to JPY 50.5 billion due in part to a deterioration in the inbound tourism environment. However, as mentioned earlier, we are aiming to achieve a new record high of JPY 53.5 billion this fiscal year. Compared with the pre-COVID period, we believe the group's business profit level has risen to a higher level. Slide 27. Let me briefly review the progress and achievements of our initiatives. We categorize them into four areas. As for stores and areas, I will be discussing HAERA in a moment, so here I will focus on the other initiatives. Regarding major renovations, of course, both Daimaru Matsuzakaya and PARCO have made substantial progress. We believe this has expanded our profit potential. In terms of customers, although the current medium-term business plan started with the in-house consolidation of our credit card business, the group's total number of ID holders has grown to 5.14 million, 1.4 times the level at the end of the previous medium-term business plan. We believe customer expansion is progressing steadily. As for content, the third area, we have successfully implemented content initiatives across the three domains of merchandising, IP, and services, as announced at the beginning of the fiscal year. I will touch on Pieroth Japan shortly. Regarding our management foundation, we believe we have made meaningful progress, including various decisive initiatives. I will explain all of these in more detail in the following slides. Slide 28. First, regarding progress and achievements in stores and areas, I would like to discuss the opening of HAERA. We believe this is the most significant milestone of both the current medium-term business plan and this fiscal year. HAERA opened in June in Nagoya's Sakae area, and as noted, we got off to a strong start, exceeding our plan. I have long viewed the opening of HAERA not as the launch of a single facility, but as an initiative that would have a significant impact on the entire area. From this perspective, the group's transaction volume from June through August increased by approximately 15% year-on-year. Furthermore, regarding the impact beyond the group, you can see from the visitor data shown on the right that the number of people visiting the Sakae area has increased since HAERA opened in June. Although not shown on this slide, looking at visitor traffic to group stores in August, Matsuzakaya Nagoya recorded a 5% increase year-on-year, excluding the south building, where operating space remains limited. Visitor traffic at Nagoya PARCO also increased by 7% year-on-year. We therefore believe the effects of HAERA's opening are benefiting our other brands as well. Next, under progress and results by store and area, the second topic is major renovations and rebuilding projects. The renovation and rebuilding projects on the left have already been completed, primarily at PARCO locations. At three of these stores, namely Ikebukuro PARCO, Nagoya, and Shinsaibashi PARCO, the benefits are expected to become more visible in the second half. So we believe this will provide a significant boost to our performance for the current fiscal year. On the right are future renovation and rebuilding projects. In the Tokyo metropolitan area, Ginza Six will soon celebrate its 10th anniversary. Plans for replacing some tenants and renovating retail space will be completed by next spring. In Nagoya, it has been decided that PARCO will move into the south building of Matsuzakaya Nagoya. The operations there are scheduled to begin in spring 2027. In Osaka, as previously announced, we have acquired 100% ownership of the south building of our Daimaru Shinsaibashi store. While its reopening is still some time away, we plan to finalize the project during this fiscal year. At Daimaru Umeda, the leased upper floors are being returned to the owner, and a major renovation on other floors is underway. Some floors will open this winter, with additional openings phased in from FY 2027 onward. As for Fukuoka, which represents our group's largest investment project, the decision has been made to close Fukuoka PARCO. The application for project implementation approval has been submitted and will move the project forward toward the 2030s. This slide summarizes progress and achievements in terms of our customer-focused initiatives. We have advanced a wide range of efforts, including consolidation of the group's credit cards, increasing app membership, and enhancing department store loyalty programs. In addition, our data analysis efforts, including the use of AI, are gradually producing results in areas such as acquiring prospective customers and increasing spending per customer. Particularly noteworthy is our inbound CRM initiative. Daimaru Matsuzakaya's original goal was to establish relationships with 500 customers by the end of the current medium-term business plan next February. However, as of the end of August, we had already connected with approximately 3,000 customers and established direct communication channels with them. Let me now discuss content and introduce Pieroth. on September 1, we acquired all shares of the company that owns Pieroth Japan. This acquisition is not simply about strengthening our wine assortment. In addition to improving our wine selection, our objective is to create new experiential value centered on wine. Pieroth Japan excels not only at selling products but also at transforming them into experiences through events such as wine tastings and rare wines auctions. We intend to move forward with this shift. We also intend to expand customer touchpoints outside our stores. Pieroth has its own customer membership base, and we plan to work toward leveraging it in conjunction with our group's existing customer membership base. Slide 32. From here, I will discuss progress and achievements related to our management foundation. First is the evaluation of businesses, stores, and properties. on the business side, we completed the transfer of JFR Kodomo Mirai in 2025. Regarding our stores, we have made the difficult decision to close or announce plans to close certain stores with limited future growth potential and profitability, despite their strong local support. For real estate, we have steadily advanced the identification and sale of non-core properties, as shown on the right, although this is based on book value. Most of these assets have already been sold. Next, slide 33 shows the enhancement and promotion of highly efficient businesses. In March of this year, we launched J. Front Prime Space through the integration of J. Front Design & Construction and PARCO Space Systems, with the aim of strengthening our architecture, interior design, and facilities business. At J. Front City Development, we have also launched initiatives to enhance the value of commercial facilities, such as providing advisory commercial services. Finally, I would like to discuss progress in fostering group cohesion. Personally, I believe this area may contribute the most to our future growth. To invigorate our people, organizations, and culture, we have expanded personnel exchanges within the group, including at the store manager level across our department stores and PARCO. As I explained six months ago, the heads of HR, finance, and IT digital now hold concurrent positions across JFR, Daimaru Matsuzakaya, and PARCO. Through this structure, we are working to improve communication and accelerate execution. The opening of HAERA has also played a major role. Throughout the planning and launch process, employees from Daimaru Matsuzakaya and PARCO gained not only mutual understanding, but also direct appreciation of each other's strengths. For example, during the opening of HAERA, Gaisho customers were escorted from Matsuzakaya Nagoya to the facility in Alphard luxury vans. PARCO employees were astonished by the number of affluent customers visiting from Matsuzakaya and by the volume of purchases they made. This gave PARCO employees a renewed appreciation for the strength of Daimaru Matsuzakaya's affluent customer base. Conversely, Matsuzakaya employees were surprised by the events PARCO organized around HAERA's opening. By making effective use of influencers and other strategies, PARCO was able to attract so many loyal end customers. The Matsuzakaya staff were surprised to discover how effective PARCO's approach was in engaging a high-quality customer base. Through experiences like these, we believe we laid the groundwork not only for the initiatives themselves, but also for genuine collaboration within the group. Slide 34. On the other hand, unfortunately, challenges remain before we can achieve the next stage of growth. Broadly speaking, there are two. One is that there is still room for sustainable growth in our core businesses. The other is that expansion of our business portfolio remains a work in progress. Regarding the first point, HAERA's successful launch is particularly noteworthy. While its true value will be tested over time, HAERA has got off to a strong start. Following Ginza Six and Shibuya PARCO, HAERA has demonstrated our capability to create entirely new store value. However, the strengths of each brand and store are still largely isolated as individual strengths. We need to further build upon this by leveraging the inherent advantages of being a group. We also continue to face challenges in resilience to changes in the external environment, including fluctuations in foreign exchange rates. Furthermore, I believe we are only halfway through the transition from management focused on cost optimization to management that prioritizes resource allocation toward growth opportunities. Our response to inflation is another issue. Regarding the expansion of our business portfolio, we have successfully implemented our content business and completed acquisition of Pieroth, but we will continue to pursue M&A opportunities. We also recognize that it will take time before our content business reaches a scale that can significantly impact on the group's revenue and profit. Given these challenges, we believe it is essential to enhance our earning power by consolidating the group's store and customer assets. Against this backdrop, we are currently formulating the next medium-term business plan, which we will announce next April. Our goal of transforming into a value co-creation retailer remains unchanged. The key concept I would like to emphasize is transforming diversity into value. We must convert the group's diversity into value for customers. We will also expand customer touchpoints while deepening our data accumulation and our understanding of customers using AI. We also need to rediscover the value of our business assets and sustainably enhance earning power. By strengthening our ability to generate cash flow, we aim to achieve sustainable and stable improvements in ROE. This slide illustrates our image of the growth trajectory for the next medium-term business plan. As for how many years the plan will cover, we will announce that next April. Conceptually, however, we will thoroughly strengthen each individual business while simultaneously leveraging the group's comprehensive capabilities. Strategic investment and business portfolio expansion will provide additional growth momentum. We also have a succession of store renovations and new store openings scheduled, primarily at our existing locations. These include the Nagoya South Building project, the reopening of Daimaru Umeda, the opening of the Daimaru Shinsaibashi South Building, and then the Hakata Tenjin redevelopment project planned for the 2030s. To break this down into two parts, I believe the most obvious example of the evolving synergy between Daimaru Matsuzakaya and PARCO is the synergy at the store level. If we look back about 10 years, what we did was establish PARCO stores adjacent to Daimaru Matsuzakaya locations, generating synergy through this concept of proximity. Now, this is shifting from mere adjacency to true integration. The clearest example of this is HAERA, and we will subsequently implement this at the south building of the Matsuzakaya Nagoya store. In Fukuoka, we aim to build the ultimate model of this integration with the establishment of a new store format. Building on that success, we plan to apply this new store format to our existing stores in the future. By combining our respective strengths, we will create new appeal. Another area of synergy is on the customer side, namely strengthening customer engagement across the entire group. We aim to implement and enhance marketing capabilities on a group-wide basis. Our strengths lie in the diversity of our stores and the diversity of our content. By offering these various strengths to each individual customer, we seek to maximize customer touchpoints. Unfortunately, the population of Japan will continue to decline. In that environment, we need to increase our touchpoints with every customer. To achieve this, we will integrate customer information across the group, deepen customer understanding, and link customer incentive programs group-wide. By advancing these initiatives in a comprehensive manner, we will transform diversity into value, starting with a deeper understanding of our customers. As a result, we aim to transform our business into a platform business that serves the high-quality, aspirational consumer segment that we place particular importance on. Let me elaborate a bit more on our group-wide collaboration efforts in two key markets. The first is Gaisho. Gaisho sales are expected to achieve another record this year, supported by double-digit growth in top-tier customers. Strong consumer demand continues to grow, particularly among younger generations. At HAERA, Gaisho sales from the store opening in June through August exceeded our plan by approximately 40%. To turn this into a broader group strength, we are exploring initiatives to enhance Gaisho services using Ginza Six as a key driver. The second market is inbound tourism. The group's total inbound transaction volume this fiscal year is expected to exceed JPY 220 billion. Even across Japan's retail industry, few groups achieve inbound transaction volumes at this scale. Daimaru Matsuzakaya has more than 200,000 inbound app members, while inbound sales at PARCO and Ginza Six have grown by about 20% year-on-year. By implementing group-wide initiatives targeting inbound visitors before, during, and after their trips, we intend to further strengthen our capabilities. Finally, let me discuss cash allocation. While we are aiming for 10% ROE, our immediate priority is to achieve 8% ROE as early as possible, compared with the forecast of 6.9% for the current year. Throughout the current medium-term business plan, equity capital has remained within an appropriate range. Our credit ratings have been maintained, and sufficient debt capacity has been secured. Building on this foundation, we intend to effectively balance future growth investment with shareholder returns by expanding our capabilities for cash flow generation. We look forward to sharing the details of our new medium-term business plan with you next April. Thank you very much for your attention. I am Yamaoka from Nomura Securities, and thank you for the presentations. I have two questions. My first question regards profit expectations for the department store segment in the second half. While the sales are expected to exceed previous estimates, SG&A expenses for Daimaru Matsuzakaya also appear to be increasing relative to the original plan, and operating profit is projected to be below the previous forecast. This creates a somewhat uneven picture. Could you explain the background behind this outlook? Second, earlier you used the term fusion and mentioned that you will provide value to customers as fusion progresses. HAERA appears to be one example where this is already taking shape. From your perspective, what kinds of new opportunities will emerge as fusion progresses? Those are my two points. Thank you for your questions. This is Munemori from Daimaru Matsuzakaya. I would like to address your first question regarding the treatment of SG&A expenses and operating income for the first and second halves of the fiscal year. There are some deferred SG&A expenses for the first half. Naturally, as those carry over and expenses increase in the second half, operating profit for the second half will decrease slightly. To boost top-line revenue in the second half, we anticipate higher commission expenses and advertising costs, as well as an increase in utility costs compared to the first half. Furthermore, one item that is somewhat unique to our company is IT-related system costs, a larger portion of which will be concentrated in the second half. We have reached a stage where certain system upgrades and modifications need to be carried out, and the associated costs will be recorded in the second half. While revenue is expected to grow, this structure will compress the profit in such that SG&A expenses carry a higher weight in the second half. Let me address your second question. When we talk about fusion, we are not referring to simply combining Daimaru Matsuzakaya and PARCO. Rather, our goal is to create value by fusioning each other's strength at a higher level. Although now we view HAERA as a partial embodiment of this concept, the facility is still managed largely as separate zones. So I believe there is a significant room to deepen that fusion further. In that regard, it's only natural that customers from Matsuzakaya Nagoya and PARCO are shopping across both stores within HAERA. We intend to thoroughly analyze these customer behaviors in greater details as additional data becomes available. As part of our work on the next medium-term business plan, we have been gathering customer feedback across regions. What has surprised us is how many customers shop across multiple retail formats. Many PARCO customers also shop at department stores, while many department store customers also visit PARCO and other shopping centers. At the same time, a surprisingly large number of customers are not aware that these businesses belong to the same group. We see this as a significant opportunity. One way to address this issue is by expanding our portfolio of stores that clearly combine the strength of both businesses, thereby maximizing the benefits for each. We'll be sharing and announcing the specific details step by step going forward. We hope you will look forward to those updates. You have mentioned timing differentiation several times in your remarks. Could you give us a rough estimate of the amount involved? Approximately JPY 1.3 billion within the department store segment. So roughly JPY 1.3 billion expenses were carried over from the first half into the second half. What exactly does that consist of? IT-related expenses for new accounting system. I am from Securities. Thank you for the presentation. I have three questions. My first question, though it's a bit technical, concerns the upside versus the initial plan for the operating profit. You have already explained that department store segment detail, but could you elaborate on the Developer segment and adjustment amounts? Second, regarding domestic department store sales, could you provide more details on trends among Gaisho customers and other customer segments? From your explanation, I assume that Gaisho sales have grown in terms of both volume and average transaction value. You also mentioned growth in the number of top-tier customers. Could you explain what is driving this growth? In addition, how do you view trends and the outlook for customers outside the Gaisho category? Third, in your explanation of the medium-term business plan, you stated that the transition toward a management approach focused on the allocation of resources toward growth opportunities is still only halfway complete. Could you explain the concept in more details and how it relates to your earlier remarks regarding the company's ability to respond to inflation? I am Nagamine from Finance, and I will answer your first question. Regarding the first half, performance exceeded the plan primarily because of the strong results in the department store segment and higher-than-expected profitability in the interior construction business within the Developer segment. In addition, while some SG&A expenses were deferred into the second half, we are able to reduce expenses in the department store segment and through adjustment items, primarily due to the change in the timing of J. Front Retailing's non-consolidated expenses. Regarding the full year, while the department store segment is slightly below target by about JPY 1.3 billion and there are additional expenses, as Munemori-san mentioned earlier, there are also adjustments at the consolidated level, including segment eliminations and the accumulation of minor items. Even on a standalone basis, some expenses have been deferred to the second half. For the full year, we expect the adjusted figures to be in line with the initial budget and plan. Regarding your second question about domestic sales, let me begin by addressing the factors behind the strong performance in Gaisho sales. In terms of customer count and average revenue per customer, the number of accounts itself is currently growing. We are also continuing to strengthen our efforts to thoroughly pursue new business opportunities. The primary drivers of top-line revenue growth are the high-end customers I have been discussing. This growth is driven by the double-digit increases in both the number of customers in the highest annual sales tier and their total sales. One factor behind this growth is the significant enhancements of customer events during the first half. As I mentioned earlier, this includes record high sales at the Gaisho events and coordinated initiatives by our three concept stores for Gaisho customers. In addition, we launched two new initiatives in March. Customer engagement has increased thanks to an enhancement to our concierge platform, which enables our Gaisho sales team to connect with customers digitally. Furthermore, we believe our sales efforts are targeting app Gold members, which are customers with high spending levels via our apps. Also a key factor in this substantial growth in our Gaisho sales customer base. Turning to domestic cash sales, first half performance was significantly affected by the World Expo effect on the simple year-on-year basis. Excluding that impact, however, cash sales actually turned positive. This is because certain stores have been seeing a steady benefit from their renovations. For example, at the Kyoto store, new products were introduced to one of the floors during the first half of the fiscal year, which has led to a substantial increase in cash paying customers. Looking ahead, we intend to drive further growth by deepening engagement with app Gold members and continue to acquire new card members. Let me answer your third question. I believe Daimaru Matsuzakaya has been one of the strongest retailers in Japan when it comes to operating in a deflationary environment. Precisely because of that strength, adapting to an inflationary environment requires a significant shift in the mindset. One example, I believe, is that we have relatively few self-operated sales floors compared with our peers in the industry. We are entering a period where inflation will make it easier to generate sales growth while also increasing costs. I believe there is a greater need to shift from a risk-averse approach toward more growth-oriented and risk-taking approach. Internally, we are discussing whether one strategy might be to reclaim and reopen the independently operated sales floors we have previously divested and to allocate resources to staff them with our own sales staff. Simply repeating past approaches will not be sufficient. What matters is identifying new forms of customer value and allocating resources accordingly. One final question. Are the customers you are newly acquiring at department stores primarily younger consumers, or is the growth more broadly diverse? As I mentioned earlier, regarding renovations at the Kyoto store, it varies significantly by location. But in areas such as Nagoya and Kyoto, where we have undertaken major renovations of entire sales floors, we have clearly seen an increase in younger customers. I am Kanamori from Nikko Securities. I have three questions. First, regarding the second half sales outlook for Daimaru Matsuzakaya, could you explain how your assumptions for duty-free sales and domestic sales have changed compared with the original plan, and by what percentage they were raised at this time? Second, regarding the deferred expenses, could you confirm that the amount is about JPY 1.3 billion in the department store segment and JPY 1.2 billion for Daimaru Matsuzakaya? Also, did these timing differences primarily occur in the first quarter or the second quarter? I am not entirely clear on the impact of the timing shift since it seems that Daimaru Matsuzakaya has managed to control its SG&A expenses relatively well in the second quarter. I would like to confirm whether this is simply due to the timing shift or if there are other factors contributing to more efficient operations. Third, due to this revised plan, I believe that when viewed by segment, only the department store segment has been adjusted while the others remain unchanged. Did you review those forecasts and intentionally leave them unchanged, or were the differences simply not large enough to warrant revisions? First, regarding the department store's second half sales by customer segment, rather than saying what percentages we had been expecting versus the previous year, I should say what percentages we are currently projecting. We are forecasting that Gaisho sales will increase 8.2% year-on-year, cash sales, excluding duty-free sales, will rise 2.3% year-on-year, and duty-free sales will increase 5.8% year-on-year. Do you no longer have the figures from the beginning of the fiscal year? I believe there was a comment in the presentation about raising the tax-exempt threshold, but I may have missed it. I would like to know, based solely on the second half of the fiscal year, whether any assumptions other than the tax-exempt threshold have changed. This is Inagami. As mentioned earlier, the figures for duty-free sales have been revised up relative to the original projections for the second half of the fiscal year. However, our assumptions for Gaisho sales and domestic cash-paying customer sales remain essentially unchanged for the second half. Thank you. My second question is, in which quarter were the timing related effects more pronounced? The first quarter or the second quarter? I do not have the detailed breakdown available today, but most of the deferred expenses relate to the second quarter. We will confirm the details and follow up separately. Regarding your third question, while only the department store segment was revised up, we assessed all businesses based on current momentum and determined that the existing forecast remained appropriate. Within the Developer segment, for example, the interior construction business performed strongly in the first half, including profitability. However, for the second half, we have factored in risks such as project delivery delays caused by supply chain constraints. As a result, we judge that the upside achieved in the first half could be offset by these risks, and therefore the full year forecast remains unchanged.