Izumi : 2023 Integrated Report

Integrated
Report	IZUMI CO., LTD.

2023

IZUMI CO., LTD.

3-3-1 Futabanosato, Higashi-ku, Hiroshima, 732-8555, Japan https://www.izumi.co.jp/（in Japanese）

Our IR website		Our sustainability website
https://www.izumi.co.jp/corp/		https://izumi.co.jp/sustainability/
e_ir/	（in Japanese）

ManagementValue Creation Story Management Philosophy / Editorial Policy and Contents

philosophy Management

Philosophy

Chapter.1	Chapter.2	Chapter.3		Chapter.4
Value Creation	Value Creation	Sustainability		Business and
Story	Strategy	Management		Stock Information

Filling our employees with pride and joy as we continue contributing to communities and our customers' lives

Management Philosophy

Vision

Vision

Action Plan

Four Dreams

2030 Long-Term Vision

1. We prioritize our sense of gratitude.
2. We carry out our work with pride.
3. We carry out our work both quickly and carefully.
4. We promise safety and security.
5. We are there for our customers.

Action Plan

Izumi's DNA

Innovation, challenge,

and speed

Contents
Part 1
Value Creation Story
Management Philosophy /
Editorial Policy and Contents	01
Our DNA and the
Izumi Group's Growth Trajectory	03
Three Strengths and Four Dreams ..	05
Financial and
Non-Financial Highlights	07
Value Creation Model	09
Part 2
Value Creation Strategy
Message from the President	11
Medium-Term Management Plan
Outline	15
Performance and Financial Strategy	17
Business Structure and Strategy
Overview	19
Business Strategy	21
Retail Business Strategies	21
Special Feature-DX Strategy	23

Part 3
Sustainability Management
Structure for Sustainability
Promotion and Materiality	25
Environment	27
Society	31
Governance	35
Part 4
Business and Stock Information
Business and Stock Information	45

Editorial Policy

Our Integrated Report aims to provide our diverse range of stakeholders with a deepened understanding of the Company. This issue of our Integrated Report clearly sets out the Izumi Group's sustainability management-centered growth strategy and our vision for the future, as well as senior management thinking, all aimed at achieving the aspirations of our 2030 Long-Term Vision.

Reporting Period

March 1, 2022 - February 28, 2023

(including some activities after March 2023)

Reference Guidelines

•The IFRS Foundation, International Integrated Reporting Framework

• GRI Sustainability Reporting Standards
• Ministry of Economy, Trade and Industry, Guidance for Collaborative Value Creation

Date of Publication

September 2023

01

02

Value Creation Story Our DNA and the Izumi Group's Growth Trajectory

Realizing a wide range of value creation while inheriting the three "DNAs"

DNA	Innovation	DNA	Challenge
1	We will change the way we think	2	We will remain positive, never fear
	and explore new opportunities		anything, and be bold in action.
	instead of accepting the status quo.

DNA&
	Chapter.1	Chapter.2	Chapter.3	Chapter.4
	Value Creation	Value Creation	Sustainability	Business and
	Story	Strategy	Management	Stock Information

History

DNA Speed

3

We will take action now, and won't wait or give up.

In 1950, our founder established a clothing wholesaler, Yamanishi Shoten Co., Ltd., against the background of the increase in demand for clothing. In the 1960s, we were the third-largest growth company in Japan in clothing manufacturing and wholesale, but looking ahead to the future, we entered the unknown world of retail. We opened our first Izumi supermarket as the first comprehensive supermarket in the Chugoku and Shikoku regions. Instead of being satisfied with the current situation, we have continued to take the next step to carve out our future.

In the early 1970s, travel by bus and train was the main mode of transportation, and stores in downtown areas and in front of stations were doing well. However, our founder predicted that the popularization of automobiles would change people's lifestyles, and in 1973 he opened a large-scale store called the "Gion Shopping Center" (currently Yume Terrace Gion) in the suburbs with parking lots. On the day of opening, the area was so crowded that there was a heavy traffic jam. Actions that do not fear failure will lead to the creation of new value.

We had been considering opening stores in Okayama and Hyogo in order to develop our dominance strategy of store openings in new regions. However, from the perspective of future growth, it became clear that Kyushu has higher population density in some areas and less competition when comparing data between east and west. We also decided to expand into Kyushu due to the low land prices and construction costs. We take immediate action when we see good data. We value that speed.

Fiscal 2023 (forecast) 476,600 million yen

(730,000 million yen)

Fiscal 2022

Operating revenue				1995
				Stores openings
			1987	in Kyushu begin
			Listed on the First Section of the
			Tokyo Stock Exchange (currently Prime
1961		1980	Market) Introduced own "ai Card"
Izumi Co., Ltd. established		Changed Japanese spelling	1990
First supermarket opened	1973	of company name
			Launched Youme Town, a
	Suburban shopping center
			large-scale, locally driven
	Gion store opened
			shopping center

1998		2021
Opened "Youme Town	2008	60th anniversary of
Takamatsu," one of the	Izumi's founding
largest stores in western	Izumi returns to its roots
Japan	in Hiroshima
2002		2017
	LECT opens with

Conducted first M&A, and	themes of culture,
food, and living
took over the business of
Nikonikodo Co., Ltd.

460,140

million yen

(700,824 million yen)*

• The Accounting Standard for Revenue Recognition was applied from the beginning of FY2022. The figures before the Accounting Standard for Revenue Recognition was applied are shown in parentheses for reference.

1961

1970

1980

1990

2000

2010

2020

(FY)

03

04

Value Creation Story Three Strengths and Four Dreams

Making the most of

Chapter.1	Chapter.2
Value Creation	Value Creation
Story	Strategy

Chapter.3

Sustainability Management

Chapter.4

Business and

Stock Information

our three strengths to realize our four dreams

Over the course of more than half a century since our founding, we have acquired and nurtured three strengths that support our growth: regional infrastructure, on-site capabilities, and ability to respond to change.

In the future, we will continue to further refine our 3 strengths and realize our 4 dreams in order to become the top store in the region.

Regional

Local communities

We will create economic benefits through job creation, local production for local consumption activities in collaboration with local governments, shopping districts, NPOs, and other organizations, and cultural rediscovery. We will also serve as

a lifeline for local communities in the event of a disaster.

Infrastructure

We are working to increase our brand power and maximize our market share in the Chugoku, Shikoku, and Kyushu regions by developing stores through our dominant strategy. We will continue to build a solid regional infrastructure by opening new stores, and M&A and alliances.

	On-site
3 Strengths	Capabilities
In order to become the top store in the
region, we have adopted a store-oriented
store managers, and staff act
	approach where store general managers,
	autonomously in managing stores in ways
	that best suit the region. As a result, we are
	able to flexibly and promptly renew our
	product lineup and expand our services
	according to the local environment and
	circumstances.

Ability to Respond to Change

We meet the diverse needs of our customers in three business formats: shopping centers, food supermarkets, and neighborhood shopping centers.

In addition, we continue to respond to the

changing times by investing in the revitalization of existing stores, and scrapping and building.

We will be successful in making customers' lives more convenient and comfortable by providing high-quality

products and services with safety and

Customers security.

Izumi's 4 Dreams

The Izumi Group has dreams. They are the four dreams that have grown together with Youme Town: communities, customers, tenants, and employees. We want to provide "the products new to the region" and "the best products in the region," while connecting and supporting everyone there. This creates new value through surprises and excitement. We will become the top store in the region while connecting broadly and deeply with communities, customers, tenants, and employees. Our dreams will never stop growing larger.

	We will provide employees with a sense
	of worth and enjoyment in contributing
	to local communities, and a sense of
Employees	fulfillment that leads to their personal
growth.

	We will use "Youme Town" as
	opportunities for the further development
	of tenants by creating successful
Tenants	examples of store creation.

05

06

Value Creation Story Financial and Non-Financial Highlights

		*1 The Accounting Standard for Revenue Recognition was applied from the beginning of FY2022. For reference,
Financial Highlights	the figures before the application of this accounting standard are shown.
*2 The figures for FY2022 are not affected by the change in revenue recognition standards. In addition, the
		operating profit margin and profit attributable to owners of the parent ratio has been changed from the previous
		"net sales ratio" to "operating revenue ratio."

Operating revenue		Operating profit / Operating profit margin
460,140 million yen		profit	33,644yen	profit margin 7.3%
		Operating			million	Operating
(million yen)	(million yen)		Operating profit			Operating profit margin (%)

Chapter.1

Value Creation

Story

Profit attributable to owners of parent / Profit margin

to owners of parent 23,188yen	margin 5.0%
Profit attributable	million	Profit

(million yen)	Profit attributable	Profit margin	(%)
	to owners of parent

Chapter.2	Chapter.3		Chapter.4
Value Creation	Sustainability		Business and
Strategy	Management		Stock Information

ROIC*3 / ROE

ROIC 6.4%				ROE 9.0%
(%)		ROIC				ROE

800,000	732,136	744,349			1
	679,778 676,800
600,000			700,824*
400,000					460,140
200,000
0
	2018	2019	2020	2021	2022	(FY)

800,000

7.3*2

7.5

600,000	5.1	5.5	5.4	5.0*1
	4.5			5.0

400,000	35,273	31,888	35,781	34,717	33,644
	2.5
200,000
0						0
	2018	2019	2020	2021	2022	(FY)

50,000															5.0*2	5.0
40,000	3.4				3.6	3.6	3.5*1	4.0
30,000	2.8	3.0
20,000	23,488	19,953	23,053	23,204	23,188	2.0
10,000																		1.0
0																		0
	2018	2019	2020	2021	2022	(FY)

15
	12.3
						10.3
10	9.6	9.6	9.0

	6.7	6.0
5
	7.1	6.6	6.4

0

2018

2019

2020

2021

2022

(FY)

*3 Operating profit after tax / (Interest-bearing debt + Equity capital + Non-controlling shareholder interest)

Total capital turnover

0.97times

(times)

3

2

1.52	1.53	1.39	1.41	1.48*1

1

0.97

0

2018

2019

2020

2021

2022

(FY)

Equity ratio

55.4%

(%)
60			53.0	55.4
	41.2	43.7	47.5
40

20

0

2018

2019

2020

2021

2022

(FY)

Earnings per share (EPS)

				324.36 yen
(yen)
400
300	327.79	278.45	321.72	324.45	324.36
200
100
0
	2018	2019	2020	2021	2022	(FY)

Dividend per share / Dividend payout ratio

per share	87.0 yen	payout ratio 26.8%
Dividend		Dividend
(yen)		Dividend per share		Dividend payout ratio (%)

150	28.7	25.8	26.5	26.8	30
24.4
100		83.0	86.0	87.0	20
80.0	80.0
50					10
0					0
2018	2019	2020	2021	2022	(FY)

Non-FinancialHighlights Aggregation scope: Izumi Co., Ltd.

CO2 emissions*4 /

CO2 emission reduction rate (relative to FY2013)*4

	18.6 t-CO2				24.3
CO2			ten	CO2 emission
emissions			thousand	reduction rate		%
(ten-thousand t)		CO2 emissions			CO2 emission	(%)
						reduction rate

40	11.5					0
	21.2	16.1
		24.3
30				25
24.6	21.8		20.7		50.0
20	19.4	18.6	50
10					12.3	75
0						100
2013	2019	2020	2021	2022	2030	(FY)
(base year)					(target)
*4 Scope1-2

Food waste recycling rate /

Food loss reduction rate (relative to FY2018)

Food waste	40.8		Food loss	63.6
recycling rate		%	reduction rate	%

(%) Food waste recycling rate Food loss reduction rate (%)

70	70.0
63.6
	56.7

40.8 40.6 41.6 40.8

35

	14.2	33.9
0
2018	2019	2020	2021	2022	2030	(FY)
(base year)					(target)

Labor productivity*5

854 ten thousand yen

(ten thousand yen)

900					950
			854
805	785	798	803
600
300
0
2018	2019	2020	2021	2022	2025	(FY)
					(target)

*5 Gross profit per employee (Calculated on a non-consolidated managerial accounting, directly-managed and existing store basis)

Ratio of women in managerial positions

Izumi	17.1			Standards stipulated in the Act on	9.7
		and Advancement in the Workplace
standard	%		Promotion of Women's Participation	%
(%)				Izumi				Standards stipulated in the Act on Promotion
			standard			of Women's Participation and Advancement
20								in the Workplace	20.0
						15.6	17.1
15

10	10.2	10.2	10.7	9.7
		6.3	6.2	8.0
5	5.7

0

2018

2019

2020

2021

2022

2023

(FY)

(target)

07

08