Additional comments

For FY2016, the Total transaction value resulted as 212,090 million yen (+33.0% increase Y/y), Net sales resulted as 76,393 million yen (+40.4% increase Y/y), Operating profit resulted as 26,284 million yen (+48.0% increase Y/y), Recurring profit was 26,442 million yen (+47.9% increase Y/y), and Net profit was 17,035 million yen (+42.1% increase Y/y). The forecast year-end dividend per share is 16 yen (Revised to increase on April 19, 2017). We could maintain the growth momentum supported by our successful measures for transaction growth, and could overachieve our original corporate plan.

In comparison to the original corporate plan (the Total transaction value 195,000 million yen, Net sales 69,030 million yen, Operating profit 22,140 million yen, Recurring profit 22,150 million yen, and Net profit 15,260 million yen), the achievement rates of this fiscal year are 108.8%, 110.7%, 118.7%, 119.4%, and 111.6%, respectively.

Breaking down each business segment, the ZOZOTOWN business resulted as 204,972 million yen in the total transaction value (+40.3% increase Y/y), the BtoB business was 6,220 million yen (-53.2% decrease Y/y), the Flea Market business was 898 million yen (No comparison because of newly established business). Within the ZOZOTOWN business, consignment sales resulted as 191,903 million yen (+39.6% increase Y/y), the purchased stock business resulted as 193 million yen (-72.1% decrease Y/y), and ZOZOUSED business was 12,875 million yen (+61.8% increase Y/y).

Behind the maintenance of such a high growth of ZOZOTOWN business, sales contribution from new shop opening in this fiscal year as well as from many shops opened in the last fiscal year, and effective promotion activities including coupon campaigns with the brands can be cited as possible reasons. By utilizing our new CRM system replaced in the last fiscal year, we communicated with our users proactively and it also contributed to the expansion of the total transaction value. In addition, we started offering “deferred payment services” (payment deadline is 2 months after the order settlement) in November 2016 to diversify our payment methods. For the fourth quarter, we conducted reward-points promotions and TVCM for new user acquisition purposes. Next, we will explain about KPI performances of ZOZOTOWN Business.

<Number of new shop openings>
By the end of March 2017, we ended with 954 shops and 3,928 brands (867 shops and 3,531 brands as of March 2016). To deal with diversified user needs, we open new shops aggressively in this fiscal year too. The total transaction value arising from new shops opened in this fiscal year was 9,260 million yen which we think good start from the first opening year.

<Number of total annual buyers>
The number of total buyers resulted as 6,324,033 during April 2016 to March 2017 period (Y/y +1,846,683, Q/q +540,652). For active members, the number reached 3,893,156 (Y/y +1,206,230, Q/q +471,716). The high increase of the number was supported by an organic growth effect from the rise of unique users as well as by the aggressive new shop opening, effective promotion activities including the coupon campaigns with our brands, and diversified payment methods. For guest members, the number resulted as 2,430,877 (Y/y +640,453, Q/q +68,936) by adjusting the usability of the guest accounts in order to become even more friendly.

<Annual purchase amount, annual purchase pieces, and number of shipments>
The annual purchase amount per active member was 46,417 Yen (-3.2% decrease Y/y, -3.8% decrease Q/q), and the annual purchase pieces resulted as 10.3 pieces (+9.2% increase Y/y, -1.8% decrease Q/q).

The both figures showed a downward trend on Q/q basis, however, this is because of increasing proportion of new users whose annual purchase amount and pieces are relatively lower than those of existing users. This always happens when acquiring new users at a good rate, so when it is limited to the existing users only, the annual purchase amount and pieces are still growing. Speaking about existing active member status, the annual purchase amount was 61,770 Yen (+6.7% increase Y/y, +1.4% increase Q/q), and the annual purchase pieces resulted as 13.6 pieces (+20.2% increase Y/y, +3.7% increase Q/q). Similar to the explanation above, the new shop openings, the aggressive coupon campaigns and the utilization of our CRM system led to the steady growth. The number of shipments in this fiscal year was 22,861,092 (+51.3% increase Y/y).

<Average retail price and average purchase amount>
For FY2016 Q4, the average retail price resulted as 4,474 yen, which was 9.1% decrease Y/y. And the average purchase amount resulted as 8,955 yen, which was 2.5% decrease on a Y/y basis. The main factor causing such the decrease in the average retail price was the drop in the price of non-discounted items due to successive opening of new shops that had relatively low price points.

In terms of the average purchase amount per shipment, we have seen the similar trend of the average retail price movement which has a direct impact on the purchase amount. However, the downward trend was limited because average purchase pieces per order has been increasing owing to the diversified item lineup and the improvement in user interface.

When we see the average retail price and average purchase amount per shipment on a full year basis, the results were 4,513 yen (-11.5% decrease Y/y) and 8,966 yen (-7.3% decrease Y/y), respectively.

For ZOZOUSED which is included in the ZOZOTOWN business, we were able to grow at a good level which was 61.8% growth Y/y. During this fiscal year, we have actually prioritized refreshing the fulfillment structure including purchase operations of second hand clothing. This is not only for short-term growth purposes, but also to establish an effective operational structure to deal with a larger volume for our next stage. We also started offering “replacement purchase service” in November, 2016. To be specific, this service enables users to put trade-in value earned by selling their own fashion goods, when purchasing new items on ZOZOTOWN. The trade-in suggestion appears on the order confirmation page where users can choose items to trade-in based on their purchase history on ZOZOTOWN. By doing so, we are aiming to facilitate the sale of new items as well as to secure the sufficient lineup of secondhand item inventory by offering a unique service utilizing our ZOZOTOWN database.

The BtoB business resulted as -53.2% minus growth on Y/y basis. We are shifting to the new model where our consolidated subsidiary aratana Inc will be in charge of operations, therefore, FY2015~FY2016 will be the off-crops season as we have already announced. While we shift towards our new business model, some of the brands will move on to different partners, or decide to do it on their own websites, resulting the changes in the transaction value according to such transition schedules. We will focus on developing websites for brands which will partner with the aratana model for the time being.

Let us move on to the ZOZOFURIMA business. This service was launched in December, 2015, and transaction value resulted as 898 million yen for this consolidated accounting period. We plan to withdraw from the flea-market business on 30 June, 2017. We will concentrate managerial resources in ZOZOUSED from now on to expand our second-hand business as a whole.

In order to revitalize the entire fashion market on our fashion platform WEAR, we are continuously operating to expand both the user base as well as the content volume. We have seen a steady growth in the service including over 9 million App downloads as of March 2017, and the number of monthly active users (undisclosed) has also been increasing.

As a result of the above, Net sales resulted as 76,393 million yen (+40.4% increase Y/y), and Gross profit resulted as 69,213 million yen (+38.2% increase Y/y). Gross profit margin (to the total transaction value) resulted as 32.6%, increased by +1.2p from 31.4% in the year-earlier period. The main factors of such a rise would be a revision of our shipping policy in May, 2016 as well as launching the paid membership system in November, 2015 together led to a higher growth in other revenues, and the rise in the sales revenue ratio of ZOZOUSED towards the total transaction value.

The SG&A ratio towards the transaction value decreased by +0.1p from 20.3% to 20.2% on a Y/y basis. The ratio of promotion spending toward the total transaction value (including both advertisement and reward-points promotion expenses) resulted in 2.7% which was +0.2p increase on a Y/y basis. On the one hand, fixed cost burden decreased arising from the transaction value expansion, and this led to the overall decrease in SG&A ratio toward the transaction value. Remarkable promotion activities held in this fiscal year were TVCM, flexible point campaign, and web advertisement such as re-targeting ad.

Lastly, Operating profit was 26,284 million yen (+48.0% increase Y/y), and Operating profit margin (to the total transaction value) was 12.4%, improved by 1.3p from 11.1% in the year-earlier period.

<Guidance for FY2017>
The corporate plan for FY2017 is, 270,000 million yen for Total Transaction Value (+27.3% Y/y), 100,000 million yen for Net Sales (+30.9% Y/y), 32,000 million yen for Operating Profit (+21.7% Y/y), 32,000million yen for Recurring Profit (+21.0% Y/y), and 22,200 million yen for Net Profit (+30.3% Y/y). The payout ratio for each dividend is planned to be 40%, at 29.0 yen.

Breaking down the total transaction value, ZOZOTOWN business is 264,000 million yen (+28.8% increase Y/y), the BtoB business is 6,000 million yen (-3.5% decrease Y/y). Within the ZOZOTOWN business, consignment sales is 24,600 million yen (+28.2% increase Y/y), and ZOZOUSED business is 18,000 million yen (+39.8% increase Y/y).

Similar to this fiscal year, the driving force for FY2017 would be ZOZOTOWN Business. To deal with diversified user needs, we plan to proceed new initiatives in addition to aggressive new shop openings as well as an implementation of flexible promotion activities. For ZOZOUSED, we will reinforce trade-in purchase to expand the business, and will continuously work hard on an establishment of an effective operational structure as well.

In terms of the BtoB business, our policy for FY 2017 prioritizes assistances to the existing client websites over scale expansion.

Explaining about profitability, we expect the rise in the SG&A ratio towards the transaction value. To concrete, we plan to have flexible promotion activities to acquire new users and to increase purchase frequency of existing users. Also, we plan to expand our logistics center to deal with increasing transactions. Take these things into considerations, we expect -0.5p drop in Operating profit margin toward the transaction value to be 11.9%.

For WEAR, with its service concept “fashion media where users can find out what they would like to have”, we will strive for the realization of user scale expansion by enriching the contents as well as by improving user interface. By leveraging each other's strengths of offline physical retail stores and online ECs, the number of people who enjoy fashion will also increase accordingly. We believe that the service will make a contribution to market expansion at an entire fashion industry level.

With regards to our private label brand which was firstly announced in this FY2016, our revised target schedule is to launch the service by FY2017 period. At this moment, only the costs which are available to reasonably assess are factored into our FY2017 plan. Therefore, we will make an announcement if a material effect on the business result will be expected from here on as soon as such an effect becomes available to calculate.