Baroque Japan : Summary of Financial Result for the Second Quarter 2022

Consolidated Financial Summary for

Baroque Japan Limited

Quarterly Financial Information for the period ended August 31, 2021

Tokyo Stock Exchange First Section, 3548

English Translation of the original Japanese-Language Report

Contents

1. Management discussion and analysis	2
(1)	Summary of the business	2
(2)	Financial review	2
2. Consolidated financial statements and notes	3
(1)	Consolidated balance sheet	3
(2)	Consolidated income statement and consolidated statement of comprehensive income	5
(3) Consolidated statement of cash flows	7
(4)	Notes to the consolidated financial statements	8
	(Note on going-concern)	8
	(Change in shareholders' equity)	8
	(Change in accounting policy)	8
	(Segment accounting)	8
	(Additional information)	8
	(Subsequent events)	8

Note:

If there is any inconsistency or conflict between English and Japanese versions of this information, the Japanese version shall prevail.

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1. Management discussion and analysis

(1) Summary of the business

During the consolidated cumulative second quarter, in regards to the Japanese economy, due to the spread of Covid-19 epidemic, the issue of State of Emergency had an effect in the restrictions of economic activities and personal consumptions also remains in a severe situation. Although vaccination has progressed so far, the spread of new variant made the outlook for the future economy continues to remain certain.

Under these circumstances, the Group's domestic business was affected by the expansion of subjected areas and extensions of the State of Emergency due to the 5th wave of Covid-19 epidemic and unseasonable weather such as localized torrential rain also led the second quarter of store sales decrease. However, domestic EC sales significantly grew year-on-year due to strengthening live commerce, etc., and as a result, domestic sales and gross profit during the consolidated cumulative second quarter, were significantly higher than in the same period of the previous year.

In addition, through proper sales and inventory control, we further strengthen to reduce business consignment expenses, etc., and while the SG&A expense ratio improved year-on-year, operating profit and recurring profit significantly exceeded the same period of the previous year.

Regarding the Chinese Joint Venture with Belle International Holdings Limited (hereon, Belle), our strategic business partner within the Joint Venture, Chinese personal consumption remains strong and the sales of both retail companies (equity method affiliates) and wholesale companies (consolidated subsidiaries) have increased year-on- year. Additionally, in regards to our US business operations, demand for luxury made-in Japan denim continued to grow, and both wholesale and EC sales significantly grew year-on-year.

As of August 31, 2021, we have 369 stores in Japan (284 directly operated, 85 through franchise) and 6 overseas stores (5 directly operated) totaling in 375 stores. In addition, our Chinese retail business operations conducted alongside our joint venture partner Belle have grown to include 304 storefronts.

As a result of the above, the second quarter of the current consolidated cumulative period saw a consolidated turnover of 26,566 million yen (26.9% increase from the same term last year), operating profit of 529 million yen (year-on-year loss of 446 million yen), recurring profit of 756 million yen (year-on-year loss of 857 million yen), and net income attributable to shareholders of the parent company was 299 million yen (year-on-year loss of 918 million yen).

(2) Financial review

During the 6 months' period ended August 31, 2021, assets decreased by 1,752 million yen to 36,590 million yen, mainly due to the decrease in Cash and cash equivalents by 2,815 million yen, the increased in Inventories by 953 million yen.

Liabilities decreased by 1,514 million yen to 15,917 million yen, mainly due to the decreased in Short-terminterest-bearing borrowings by 1,000 million yen, the decrease in Notes and trade payables by 117 million yen and Current tax payable by 159 million yen.

Equity decreased by 238 million yen to 20,673 million yen, mainly due to the decrease in Retained earnings by 1,158 million yen for the payment of dividends, the increase in Retained earnings by 299 million yen from net profit, the increase in Foreign currency translation reserve by 350 million yen, and the increase in Non-controlling interests by 270 million yen.

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2. Consolidated financial statements

(1) Consolidated balance sheet

					(Unit: million yen)
				As at February 28, 2021	As at August 31, 2021
Assets
	Current assets
		Cash and cash equivalents	15,924	13,109
		Notes and trade receivables	8,001	8,010
		Inventories	4,918	5,871
		Consumables	197	85
		Others	348	387
		Total current assets	29,390	27,465
	Non-current assets
		Property, plant and equipment
			Building and leasehold improvements	1,317	1,323
			(net)
			Land	350	350
			Construction in progress	32	3
			Others (net)	74	77
			Total property, plant and equipment	1,773	1,754
		Intangible assets
			Software	701	631
			Others	118	200
			Total intangible assets	819	832
		Investments and other assets
			Investments in and advances to	1,597	1,772
			associates
			Rental deposits	3,232	3,242
			Deferred tax assets	1,426	1,446
			Others	102	76
			Total investments and other assets	6,359	6,538
		Total non-current assets	8,952	9,125
	Total assets	38,343	36,590

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				(Unit: million yen)
			As at February 28, 2021	As at August 31, 2021
	Liabilities
	Current liabilities
	Notes and trade payables		3,872	3,755
	Short-terminterest-bearing		3,000	2,000
	borrowings
	Interest-bearing borrowings		125	－
	Other payables	946	947
	Accrued expenses		641	520
	Current tax payable	550	390
	Deposits received		10	0
	Provision for bonus	297	148
	Provision for reinstatement costs		9	23
	Others	180	240
	Total current liabilities		9,632	8,027
	Non-current liabilities
	Interest-bearing borrowings		6,000	6,000
	Other payables	15	15
	Deferred tax liabilities		65	70
	Deposits received	459	468
	Provision for retirement benefits		17	18
	Provision for reinstatement costs	1,120	1,158
	Others		121	158
	Total non-current liabilities	7,798	7,890
	Total liabilities		17,431	15,917
	Equity
	Shareholders' equity
	Share capital	8,258	8,258
	Share premium		8,059	8,059
	Retained earnings	3,855	2,996
	Treasury stock		△692	△692
	Total shareholders' equity	19,480	18,621
	Other reserves
	Foreign currency translation reserve		△170	179
	Total other reserves	△170	179
	Non-controlling interests		1,601	1,872
	Total equity	20,911	20,673
	Total liabilities and equities		38,343	36,590

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