3548.T

Previous Mid-Term Management Plan (2022-2026) Review

• Baroque Japan reported net profit turning positive in FY2026 after the termination of its Chinese joint venture, but overall performance remains far from the company's target, with total revenue declining significantly from 70 billion yen a decade prior.
• Key challenges confirmed: persistent underperformance of AZUL BY MOUSSY in the suburban shopping center sector, company-wide productivity decline (overhead costs have grown while sales per square foot and overall revenue have dropped), and need to expand into profitable non-apparel businesses.

New Mid-Term Management Plan Framework

• The 2-year period from FY2027 to FY2028 is positioned as a phase for business recovery and new business incubation. The plan targets completing operational restructuring and building a lean management system, with new high-growth businesses launched by the final FY2028 February term.

Core Strategic Initiatives

• Apparel Business Recovery: Concentrate management resources on high-profit brands, expand store footprint for high-growth brands. Prioritize AZUL BY MOUSSY turnaround, while parallelly developing a new over 1 billion yen replacement brand to offset AZUL's underperformance. Leverage proven successful strategies from MOUSSY (106.6% year-over-year same-store sales growth) and RODEO CROWNS WIDE BOWL (112.3% year-over-year same-store sales growth) to rebuild AZUL's brand value and recover customer traffic.
• Global Business Restructuring: Overhaul existing international brands (MOUSSY, ENFÖLD) that have paused expansion post-COVID, adjusting strategy to account for the Chinese economic recession, and rebuild them into globally competitive brands.
• Cross-Industry New Business Development: Launched a joint venture DB Capital Limited with JD.com (one of the world's top three e-commerce platforms). The JV targets Japanese companies with strong technology/culture brands that face succession challenges or lack capital/human resources for global expansion, providing support for their overseas (especially Chinese) expansion by leveraging Baroque's China market expertise and JD.com's global e-commerce platform to boost portfolio company value.
• Foundation and ESG Initiatives: Prioritize building a stable management base and improving corporate value. Promote data-driven human resources management, talent development, and an employee stock compensation plan to boost engagement. Continue sustainability initiatives targeting CDP A rating (current CDP score is B), and pursue zero waste and carbon neutrality by FY2031 February term. Maintain stable shareholder returns even during periods of weak performance.

• For FY2027 February term, management guides: consolidated revenue of 52.97 billion yen, 2.9% year-over-year growth; consolidated gross profit of 32.245 billion yen, 4.3% year-over-year growth; consolidated operating profit of 1.352 billion yen, 320.9% year-over-year growth; net profit attributable to parent company shareholders of 0.743 billion yen, 102.5% year-over-year growth. This guidance reflects expectations of significant profit growth from the ongoing operational restructuring and AZUL BY MOUSSY turnaround. No prior guidance is referenced for upward/downward revision in the transcript.

1. FB・SB (Fashion Building/Station Building) Brand Segment: Driven by strong performance of MOUSSY's denim and collaboration products, revenue grew 103.8% year-over-year. No absolute revenue amount is disclosed in the transcript. 2. SC (Shopping Center) Brand Segment: RODEO CROWNS WIDE BOWL achieved 112.3% year-over-year same-store sales growth on large customer traffic recovery, but overall segment revenue declined year-over-year due to extended customer traffic decline at AZUL BY MOUSSY, the company's largest revenue brand. 3. Department Store Brand Segment: Revenue declined year-over-year due to a drop in Chinese tourist customers. Consolidated total revenue for FY2026 February term was 51.499 billion yen, down 11.5% year-over-year. Domestic revenue was 50.771 billion yen, down 3.7% year-over-year.

• Persistent extended customer decline at AZUL BY MOUSSY, the company's historically largest business segment, has dragged down overall company revenue, and a failure to complete the brand turnaround could negatively impact overall performance. • Post-COVID, the company's core operational capabilities have eroded, and company-wide productivity has declined, which could slow the pace of recovery if restructuring is not effective. • High raw material costs and elevated fuel prices driven by global geopolitical tensions create upward cost pressure for the apparel supply chain. • The Chinese economic recession has forced changes to the company's global expansion strategy, adding uncertainty to international brand development. • New cross-industry and JV business initiatives have unproven profitability and carry execution risk.

No formal Question and Answer section is included in the provided transcript.