Fast Retailing : Third Quarterly Report 2023/24 (2024.3.1-2024.5.31)

FAST RETAILING CO., LTD.

迅 銷 有 限 公 司

Third Quarterly Report 2023/24

2024.3.1-2024.5.31 Stock Code: 6288

Contents

1.	Corporate Profile	1
2.	Financial Highlights	2
3.	Management Discussion and Analysis	4
4.	Information about the Reporting Entity	9
5.	Financial Section	11
1. Interim Condensed Consolidated Financial Statements
(1) Interim Condensed Consolidated Statement of	12
	Financial Position
(2) Interim Condensed Consolidated Statement of
	Profit or Loss and Interim Condensed Consolidated	14
	Statement of Comprehensive Income
	Interim Condensed Consolidated Statement of Profit or Loss	14
	Interim Condensed Consolidated Statement of	16
	Comprehensive Income
(3) Interim Condensed Consolidated Statement of	18
	Changes in Equity
(4) Interim Condensed Consolidated Statement of Cash Flows	20
2. Others	31
Independent Accountant's Review Report	32

1. Corporate Profile

Board of Directors	Principal Place of Business in Japan
Representative Executive Director	Midtown Tower 9-7-1
Tadashi Yanai (Chairman, President and CEO)	Akasaka, Minato-ku
Tokyo 107-6231
Executive Directors	Japan
Takeshi Okazaki
Kazumi Yanai	Principal Place of Business in Hong Kong
Koji Yanai	702-706, 7th Floor, Mira Place Tower A
	No. 132 Nathan Road
Independent Non-executive Directors	Tsim Sha Tsui
Nobumichi Hattori (External)	Kowloon
Masaaki Shintaku (External)	Hong Kong
Naotake Ono (External)
Kathy Mitsuko Koll (aka Kathy Matsui) (External)	HDR Registrar and HDR Transfer Office
Joji Kurumado (External)	Computershare Hong Kong Investor Services Limited
Yutaka Kyoya (External)	Shops 1712-1716, 17th Floor
	Hopewell Centre
Audit & Supervisory Boards	183 Queen's Road East
Masaaki Shinjo	Wanchai
Masumi Mizusawa	Hong Kong
Tomohiro Tanaka
Keiko Kaneko (External)	Stock Code
Takao Kashitani (External)	Hong Kong: 6288
Masakatsu Mori (External)	Japan: 9983
Company Secretary	Website Address
Shea Yee Man	https://www.fastretailing.com/eng/
Independent Accountants
Deloitte Touche Tohmatsu LLC
Principal Banks
Sumitomo Mitsui Banking Corporation
MUFG Bank, Ltd.
Mizuho Bank, Ltd.
The Hong Kong and Shanghai Banking Corporation Limited
Registered Office and Headquarters
10717-1 Sayama
Yamaguchi City
Yamaguchi 754-0894
Japan

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2. Financial Highlights

Consolidated Financial Summary

	Third Quarter		Third Quarter
Term		of			of		62nd Fiscal
62nd Fiscal		63rd Fiscal		Year
		Year			Year
	Nine months		Nine months		Year ended
		ended			ended
Accounting period					31 August
31 May			31 May
				2023
	2023		2024
Revenue (Millions of yen)	2,143,504		2,366,501		2,766,557
Operating profit (Millions of yen)	330,574		401,803		381,090
Profit before income taxes (Millions of yen)	359,203		477,767		437,918
Profit for the period attributable to owners	238,519		312,838		296,229
of the Parent (Millions of yen)
Comprehensive income attributable to owners	271,077		504,264		423,601
of the Parent (Millions of yen)
Equity attributable to owners of the Parent (Millions of yen)	1,694,899		2,137,916		1,821,405
Total assets (Millions of yen)	3,100,617		3,684,122		3,303,694
Basic earnings per share (Yen)	777.90		1,020.02		966.09
Diluted earnings per share (Yen)	776.65		1,018.25		964.48
Ratio of equity attributable to owners of the Parent to total assets (%)	54.7		58.0		55.1
Net cash generated by operating activities (Millions of yen)	315,896		454,391		463,216
Net cash (used in) / generated by investing activities (Millions of yen)	(505,838)		(85,463)		(574,402)
Net cash (used in) / generated by financing activities (Millions of yen)	(240,721)		(229,578)		(364,562)
Cash and cash equivalents at end of the period (year) (Millions of yen)	922,567		1,097,753		903,280
		Three months		Three months
Accounting period		ended		ended
	31 May		31 May
		2023			2024
Revenue (Millions of yen)		676,153		767,502
Profit attributable to owners of the Parent (Millions of yen)		85,126		116,926
Basic earnings per share for the period (Yen)		277.60		381.22

(Notes) 1. FAST RETAILING CO., LTD. (the "Company", the "Parent", or the "Reporting entity") prepared interim condensed consolidated financial statements and therefore has not included the non-consolidated financial summary of the Reporting entity.

1. The financial figures are sourced from the interim condensed consolidated financial statements or consolidated financial statements prepared in accordance with International Financial Reporting Standards ("IFRS").
2. Our common stock has been split on a 3-to-1 basis, effective 1 March 2023. Basic earnings per share, and diluted earnings per share have been calculated assuming this stock split was conducted at the beginning of the previous fiscal year.
3. • 2 -

Business Description

There were no significant changes in the nature of the business engaged by the Company and its subsidiaries (collectively, the "Group") during the nine months ended 31 May 2024.

In addition, there were no significant changes in the organizational structure of the Group, including the major subsidiaries, during the nine months ended 31 May 2024.

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3. Management Discussion and Analysis

Business Review

1. Business and Operational Risks

No new business-related risks have arisen during the nine months ended 31 May 2024.

There have been no significant changes concerning business-related risks as stated in the annual report for the preceding fiscal year.

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2. Financial Analysis

1. Financial Position and Results of Operations
   (ⅰ) Results of Operations
   The Fast Retailing Group generated a significant increase in revenue and profits in the third quarter of fiscal 2024, or the nine months from 1 September 2023 to 31 May 2024, with consolidated revenue totaling 2.3665 trillion yen (+10.4% year-on-year) and operating profit rising to 401.8 billion yen (+21.5% year-on-year). In addition to the continued strong performances by UNIQLO operations in the North America, Europe, and Southeast Asia regions, which all reported large revenue and profit gains, UNIQLO Japan also reported significantly higher revenue and profit for the three months from March to May. All these factors helped generate an overall record performance for the Group on a consolidated basis. We recorded 75.9 billion yen under finance income net of costs, primarily comprised of 40.4 billion yen in net interest income and 35.5 billion yen in translated foreign exchange gains on foreign-currency denominated assets. As a result, profit before income taxes rose to 477.7 billion yen (+33.0% year-on-year) over the nine-month period and profit attributable to owners of the parent increased to 312.8 billion yen (+31.2% year-on-year).
   The Fast Retailing Group is focusing on a number of areas as part of its endeavor to become a global No.1 brand that is essential to daily living and is trusted by all customers around the world. Those measures include (1) Further progressing the development of a digital consumer retailing industry, (2) Diversifying global earnings pillars, (3) Pursuing a business model in which the development of business contributes to sustainability, (4) Expanding the GU business segment, as well as Theory and other Global brands, and (5) Strengthening human capital. We aim to enhance our product development and branding and accelerate high-quality store openings at UNIQLO International in particular as the growth pillar of the Fast Retailing Group. We are also committed to creating LifeWear, simple and high-quality everyday clothing, in order to help build a sustainable society. Our aim is to create high-quality clothing that lasts a long time, clothing that exerts a lower impact on the planet and is made in healthy and safe working environments, and circular clothing that can ultimately be recycled or reused.

UNIQLO Japan

UNIQLO Japan reported an increase in revenue and a significant rise in profits in the first nine months of fiscal 2024, with revenue totaling 722.0 billion yen (+1.7% year-on-year) and operating profit reaching 127.8 billion yen (+28.3% year-on-year). The segment generated especially strong revenue and profit gains in the three months from March to May. Same-store sales expanded by 9.0% year-on-year in the third quarter on the back of persistently warm weather and strong sales of T-shirts, Bra Tops, and bottoms made of ultra-stretch materials that were featured in our latest advertising campaigns. The gross profit margin improved by 4.1 points year-on-year after we were able to reduce the amount of discounting required to offload excess stock and thereby improve the discounting rate. In addition, the impact of spot exchange rates used for additional production orders also eased, resulting in an improvement in cost of sales. Looking ahead, we do expect spot rates to impact results in the three months from June to August as we are currently submitting additional production orders for products that are running low on stock due to the strong sales in the previous quarter. As a result, cost of sales for the second half of fiscal 2024 from March to August 2024 is expected to hold roughly steady at the previous year's level. Finally, the selling, general and administrative expense ratio improved by 2.1 points year-on-year as the higher revenue performance resulted in a decline in personnel, store rents, and advertising and promotion cost ratios.

UNIQLO International

UNIQLO International reported a significant increase in both revenue and profit in the first nine months of fiscal 2024, with revenue rising to 1.2928 trillion yen (+17.8% year-on-year) and operating profit expanding to 221.9 billion yen (+20.6% year-on- year). UNIQLO brand recognition is rising across all markets as a result of our persistent strategy of opening new stores around the world that enable people to experience the great benefits of LifeWear, and this is now helping to generate a virtuous cycle of strengthening business performance.

Breaking down the UNIQLO International third-quarter performance from March to May into individual regions and markets and viewing performance on a local currency basis, the Mainland China market and Hong Kong market reported declines in revenue and large contractions in profit. Sales in the Mainland China market struggled in comparison with the high bar set in the previous year and in the face of a slowdown of consumer appetite, unseasonal weather, and product lineups that didn't fully satisfy the needs of local customers. By contrast, the Taiwan market reported large revenue and profit gains and South Korea reported higher revenue and profit on the back of strong sales of Summer ranges. Meanwhile, Southeast Asia, India & Australia reported higher revenue and a significant increase in profits as our efforts to enhance communication of attractive Summer products around the time of the 40th UNIQLO Thank You Festival and other promotional sales boosted sales of Bra Tops, UV-cut,T-shirts, and other core ranges. UNIQLO North America reported large increases in revenue and profit due to strong sales of Bra Tops, linen, sports utility wear, and other ranges resulting from our decision to strengthen marketing and communications to strategically enhance

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sales of certain products. UNIQLO Europe reported large gains in revenue and profit. Raising UNIQLO brand visibility across the region helped generate higher-than-anticipated sales at our newly opened stores in Edinburgh in the UK and Rome, Italy, and the region also reported impressive double-digityear-on-year growth in same-store sales over the three-month period.

GU

The GU business segment reported an increase in revenue and a large rise in profits in the first nine months of fiscal 2024 on the back of strong sales of products that successfully captured mass fashion trends. Revenue totaled 246.4 billion yen (+8.1% year- on-year) and operating profit expanded to 29.4 billion yen (+14.2% year-on-year).

In the three months from March to May, GU witnessed strong sales of Sweat Look T-shirt, Cocoon Jogger Pull-on Pants, Light Denim Wide Pants, and other items that incorporated global mass fashion trends, suggesting that the brand will soon be well positioned to expand more earnestly into international markets.

Global Brands

In the first nine months of fiscal 2024, the Global Brands segment reported a decline in revenue to 103.7 billion (−2.5% year-on- year) and an operating loss of 0.3 billion yen (compared with an operating profit of 1.4 billion yen in the previous year).

In the three months from March to May, sales for Theory in the United States in particular proved sluggish, resulting in a slight year-on-year decline in revenue for the Theory operation as a whole. Theory operating profit declined significantly as the operation failed to sufficiently control personnel costs and other business costs. While revenue from our PLST label declined year-on-year, after restructuring measures resulted in a contraction in total store numbers, operating profit increased on the back of improved cost structures. However, PLST is showing signs of a steady recovery, with third-quartersame-store sales rising on the back of strong sales primarily at urban stores operating under the new business model. Finally, while Comptoir des Cotonniers reported a decline in revenue on the back of fewer store numbers, the brand also reported a contraction in operational losses as restructuring measures helped improve cost structures.

Sustainability

Fast Retailing is advancing its LifeWear concept-the ultimate in everyday clothing, designed to make everyone's life better-to create apparel that emphasizes quality, design and price, in addition to being environmentally friendly, protecting human rights and contributing to society. We have identified six priority areas (materialities) for our sustainability activities. The main company activities during the third-quarter consolidated accounting period are as follows.

• Creating new value through products and sales: UNIQLO is promoting its "RE.UNIQLO" initiative to transition to a more circular society by extending the lifespan of clothes, as part of its REDUCE, REUSE, RECYCLE activities. For REDUCE activities, as at the end of May 2024, RE.UNIQLO Studio, which offers clothing repair, remake and upcycle services, has been rolled out to 44 UNIQLO stores across 19 countries and regions, and there are plans to expand it to more than 50 stores globally by the end of December 2024. For REUSE activities, the second round of trials of the UNIQLO Pre-Owned Clothes Project is being conducted at the UNIQLO Setagaya Chitosedai and UNIQLO Tenjin stores, selling pre-owned UNIQLO clothing through the end of August 2024. For RECYCLE activities, UNIQLO will be the first provider to use molecular recycling materials from some of its store-collected products (high polyester mix materials) for the Swedish national team's official apparel at the major global sporting event to be held in France in 2024.
• Respecting human rights and labor environment in the supply chain: We are continually strengthening our efforts to improve transparency and traceability, and respect human rights and labor environments. In 2019, we supported the industry commitment to Responsible Recruitment for migrant workers and clarified our policy against forced labor. In 2022, we launched workplace monitoring focused on foreign migrant workers' recruitment and employment, and classified costs to migrant workers, such as recruitment fees, travel expenses, and passport renewals as zero-tolerance items in our workplace monitoring. If such zero- tolerance issues are found, we require partner factories to remedy the matters immediately. In addition, we have conducted training and other activities with external partners such as the International Organization for Migration (IOM). As a result, we confirmed that by the end of May 2024, more than 9,800 foreign migrant workers received repayment of recruitment fees and related costs, which amount to over USD 4.5 million (approximately 700 million yen).
• Consideration for the environment: We have set ourselves the goal of reducing greenhouse gas emissions at our stores and offices by 90% by the fiscal year ending August 2030 compared to the fiscal year ended August 2019, and by 20% in our supply chains. In addition to implementing renewable energy within the company, we are strengthening our efforts to reduce greenhouse gas emissions together with UNIQLO and GU's main factories. As a result, our own greenhouse gas emissions in the fiscal year
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ended August 2023 were reduced by 69.4% compared to the fiscal year ended August 2019 (45.7% reduction in the previous fiscal year), and by 10.0% in supply chains (6.2% reduction in the previous fiscal year). Also, the percentage of renewable energy implementation in the company reached 67.6% (42.4% in the previous fiscal year). In recognition of these efforts and disclosures, for the second consecutive year we have been recognized as an "A-List" company for climate change by international non-profit organization CDP.

1. • Community co-existence and mutual support: UNIQLO is promoting the PEACE FOR ALL project, which involves selling graphic T-shirts designed by celebrities who share our desire to take action for world peace. All profits (equivalent to 20% of the sale price per shirt) are donated to three humanitarian aid organizations to support those affected by poverty, discrimination, violence, conflict, and war. Since the start of the initiative in June 2022, our donations exceeded 1.2 billion yen at the end of April 2024.
   • Supporting employee fulfillment: We are implementing various initiatives to promote diversity in four priority areas of gender, Global One Team, disabilities and LGBTQ+, including the introduction of systems and training programs to support relevant parties. In the first half of 2024, the Human Rights Committee discussed reports on improving the ratio of women in managerial positions and reducing the gender pay gap, along with measures to address these issues. Based on the committee's meetings, development plans and skill enhancement support for female management candidates, and other measures to promote the appointment of female managers, were discussed at women's human resources development meetings. In May and June 2024, human rights training was conducted for Group executive officers and business managers to deepen their understanding of human rights risks in management through example cases that could easily be perceived as harassment or discrimination.
   • Implementing good corporate governance: To enable rapid and transparent management, we have a number of committees engaged in open and active discussions. The Risk Management Committee discusses measures to minimize the impact on the company in the event of a business partner's unexpected business suspension and other occurrences, in addition to strengthening internal information security and internal controls. The Human Rights Committee reports on the current status and issues raised via the hotline for company employees and the company's hotline for factory employees, and discusses ways to resolve these issues. It also discusses issues related to the results of human rights due diligence conducted at the company's bases in Japan and overseas, providing feedback to relevant departments. Regarding policies for monitoring the working environments at factories, the committee has discussed points that should be strengthened in response to human rights issues .
2. Financial Position
3. 
   Total assets as at 31 May 2024 were 3.6841 trillion yen, which was an increase of 380.4 billion yen relative to the end of the preceding fiscal year. The principal factors were an increase of 194.4 billion yen in cash and cash equivalents, an increase of 43.8 billion yen in trade and other receivables, a decrease of 25.6 billion yen in other current financial assets, a decrease of 44.4 billion yen in inventories, an increase of 65.6 billion yen in derivative financial assets, an increase of 22.0 billion yen in property, plant and equipment, an increase of 41.0 billion yen in right-of-use assets and an increase of 96.3 billion yen in non-current financial assets.
   Total liabilities as at 31 May 2024 were 1.4885 trillion yen, which was an increase of 58.1 billion yen relative to the end of the preceding fiscal year. The principal factors were a decrease of 13.0 billion yen in trade and other payables, an increase of 33.5 billion yen in lease liabilities, an increase of 10.4 billion yen in current tax liabilities, an increase of 10.5 billion yen in other current liabilities and an increase of 13.3 billion yen in deferred tax liabilities.
   Total net assets as at 31 May 2024 were 2.1955 trillion yen, which was an increase of 322.2 billion yen relative to the end of the preceding fiscal year. The principal factors were an increase of 208.5 billion yen in retained earnings, an increase of 107.0 billion yen in other components of equity and increase of 5.7 billion yen in non-controlling interests.

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1. Cash Flows Information
   Cash and cash equivalents as at 31 May 2024 had increased by 194.4 billion yen from the end of the preceding fiscal year, to 1.0977 trillion yen.
   (Operating Cash Flows)
   Net cash generated by operating activities for the nine months ended 31 May 2024 was 454.3 billion yen (315.8 billion yen was generated during the nine months ended 31 May 2023). The principal factors were cash inflow from profit before tax for 477.7 billion yen and depreciation and amortization for 151.5 billion yen, cash outflow from income taxes paid for 135.2 billion yen.
   (Investing Cash Flows)
   Net cash used in investing activities for the nine months ended 31 May 2024 was 85.4 billion yen (505.8 billion yen was used during the nine months ended 31 May 2023). The principal factors were 53.0 billion yen in payments for acquisition of property, plant and equipment and 23.4 billion yen for acquisition of intangible assets.
   (Financing Cash Flows)
   Net cash used in financing activities for the nine months ended 31 May 2024 was 229.5 billion yen (240.7 billion yen was used during the nine months ended 31 May 2023). The principal factors were 104.2 billion yen in dividends paid to owners of the parent and 108.7 billion yen in repayments of lease liabilities.
2. Estimates and Assumptions Used for Those Estimates in the Accounting
   For the third-quarter consolidated accounting period, there are no significant changes to the estimates or the assumptions used for those estimates.
3. Operational and Financial Challenges to Address as Priority
   There have been no significant challenges during the nine months ended 31 May 2024 that must be addressed by the Group.
4. Research and Development Not applicable.
5. Significant Facilities
   The following are the significant facilities that were newly completed during the nine months ended 31 May 2024.
   

Company name	Type of facility	Name of business	Location	Completion date
UNIQLO CO., LTD.	UNIQLO Japan	Urawa Misono store	Japan	April 2024
stores	Saitama
Not applicable.

The following are the significant facilities that were newly planned during the nine months ended 31 May 2024.

Not applicable. Not applicable.

3. Significant Contracts in Business Operation None.

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