JINS : Quarterly Securities Report 2Q

Quarterly Securities Report

(The Second Quarter of the 35th Fiscal Year)

JINS HOLDINGS INC.

[Cover Page]

[Document title]

Quarterly Securities Report

[Article of the applicable law requiring submission of this document]

Article 24-4-7, Paragraph 1 of the Financial Instruments and Exchange Act

[Filed to]

Director-General of the Kanto Local Finance Bureau

[Filing date]

April 8, 2022

[Fiscal year]

Second quarter of the 35th term (from December 1, 2021 to February 28, 2022)

[Company name]

JINS HOLDINGS Inc.

[Company name in English]

JINS HOLDINGS Inc.

[Title and name of representative]

Hitoshi Tanaka, CEO and Representative Director

[Address of registered headquarter]

[Telephone number]

26-4 Kawaharamachi 2-chome, Maebashi-shi, Gunma

(This is the address of the registered head office, but the actual business is conducted at the nearest place of contact.)

Not applicable.

[Name of contact person]

Not applicable.

[Nearest place of contact]

Iidabashi Grand Bloom 30th Flr., 10-2 Fujimi 2-chome, Chiyoda-ku, Tokyo

[Telephone number]

+81-3-5275-7001 (main number)

[Name of contact person]

[Place for public inspection]

Yukinori Arakawa, Executive Officer and General Manager of Administration

Division

Tokyo Stock Exchange, Inc.

(2-1 Nihombashi Kabutocho, Chuo-ku, Tokyo)

Part I Company Information I. Overview of Company

1. Key financial data

(Notes) 1. As the Company prepares the quarterly consolidated financial statements, the description of key financial data of the submitting company is omitted.

2. The Company has applied the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, March 31, 2020),

etc., from the beginning of the first quarter and the key financial data for the six months ended February 28, 2022 and the second quarter under review are data after the said accounting standard have been applied.

2. Description of business

There are no significant changes in the description of business which the Company group (the Company and the Company's affiliates.

Hereinafter, the "Group") operates during the six months ended February 28, 2022.

In addition, there are no changes in major affiliates.

II. Overview of Business

1. Business risks

In the six months ended February 28, 2022, there were no matters that may have a significant impact on the judgment of investors in the overview of business, financial information and other matters stated in this Quarterly Securities Report or no significant changes in "Business Risks" stated in the Annual Securities Report for the previous fiscal year.

The impact of COVID-19 is as stated in "2. Management analysis of financial position, operating results and cash flows" and we will continue to monitor the situation.

In addition, there were no material events.

2. Management analysis of financial position, operating results and cash flows

Forward-looking statements in this document are based on the Group's judgments as of the end of this quarter of the fiscal year under review.

• (1) Financial position and operating results

  During the six months ended February 28, 2022 (September 1, 2021 to February 28, 2022), the Japanese economy experienced the continued seesawing impact of the novel coronavirus disease (COVID-19) on personal consumption, as semi-emergency coronavirus measures were declared again in mid-January due to the prevalence of variants, despite the complete lifting from October onward of the state of emergency, etc., which had been declared due to the spread of COVID-19, mainly in urban areas.

  Looking at the global economy, infection prevention measures, including travel restrictions, remain in place in many regions partly owing to the impact of COVID-19 variants. Particularly in China, urban areas have been intermittently locked down under the zero-Covid policy, leading to concerns about the impact on economic conditions. In addition, there are concerns about a possible worsening of economic conditions as the economic impact of the Russian invasion of Ukraine should be carefully watched and global inflation has become more apparent due to the rising price of crude oil and raw materials.

  The domestic retail eyewear market (eyeglasses for vision correction) continues to experience ups and downs versus the same period of the previous year, owing to the impact of COVID-19.

  Under this market environment, in the eyewear business, the Company and its consolidated subsidiaries (collectively, the "Group") took such initiatives as promoting digital transformation, and strengthening development of innovative products, which they identified as management issues. In the domestic eyewear business, we worked to improve management efficiency and offer consumers a more convenient purchasing experience, including introducing a solution to improve supply and demand management with an eye on globalization using AI without relying on prior experience alone. With regard to product development, as part of our initiatives to realize "the world free from myopia," we conducted a joint project to develop an eyeglass-shaped, violet-light-emitting medical device designed to suppress progress of myopia, and total research and development expenses were ¥110 million for the six months ended February 28, 2022.

  In terms of store development, the number of eyewear stores as of February 28, 2022, was 680, including 451 stores in Japan and 229 stores overseas (173 in China, 44 in Taiwan, 6 in Hong Kong, and 6 in the United States).

  As a result, for the six months ended February 28, 2022, the Company posted net sales of ¥32,704 million (up 3.4% year-on-year) partly thanks to the impact of new store openings despite the impact of COVID-19. Operating profit was ¥1,902 million (down 28.5% year-on-year) partly owing to the effect of changes to revenue recognition standards, etc. Ordinary profit was ¥2,172 million (down 15.9% year-on-year), and profit attributable to owners of parent was ¥1,170 million (down 38.8% year-on-year), partly due to the recording of provision of allowance for office relocation expenses related to relocation of the Tokyo head office in extraordinary losses.

• (2) Analysis and examination of operating results, etc. from management perspective 1) Business results by segment

In the domestic eyewear business, the second release of the JINS Pokémon model, in which we incorporated Pokémon to eyewear designs through JINS' unique point of view, was well- received. Sales were also driven by high-value-added products, including "Airframe Hingeless," for which we eliminated the hinges connecting the front of the frame with the temples, creatinga unique new fit and comfort for users. In addition, membership of the JINS app reached approximately 10.14 million people as of the end of February 2022 and e-commerce sales continued to grow at a steady pace. Also, sales of contact lenses, which provide JINS 1DAY, have grown as planned. Regarding the impact of COVID-19, although there were signs of a recovery in footfall to levels prior to the outbreak of the pandemic from October onward, when the declaration of a state of emergency, etc., was lifted, customer traffic has decreased as semi-emergency coronavirus measures were declared mainly in urban areas in mid-January due to the prevalence of COVID-19 variants. As such, the situation is still seesawing.

In terms of store development, the number of stores in Japan was 451 (21 openings and 4 closures) as of the end of the period under review.

As a result, net sales of the domestic eyewear business were ¥25,630 million (up 0.7% year-on-year), and segment operating profit was ¥1,921 million (down 22.2% year-on-year).

In the overseas eyewear business, profit significantly decreased in China as personal consumption stalled, owing partly to intermittent lockdowns of cities amid the continued strengthening of restrictions on individual movement imposed by the government as a measure to combat COVID-19, in addition to the impact of factors such as a fallback from the previous year, when there were exemptions to social security fees.

In Taiwan, profit increased as performance recovered steadily from the impact of COVID-19 infections, though our business was impacted by factors such as an increase in personnel expenses to secure opticians as required by the Optometric Personnel Act.

In Hong Kong, the slump in consumption due to the effects of protests resulting from political unrest and COVID-19 is on a recovery track, and business performance is also recovering steadily.

In the United States, we have reopened all of our brick-and-mortar stores, which had been closed due to the impact of COVID-19, and business performance is on a recovery track.

In terms of store development, the total number of stores overseas was 229 as of the end of the period under review, including 173 stores in China (9 openings and 6 closures), 44 in Taiwan (6 openings and no closures), 6 in Hong Kong (no openings or closures), and 6 in the United States (no openings or closures).

As a result, net sales of the overseas eyewear business were ¥7,074 million (up 14.3% year-on-year), and segment operating loss was ¥18 million (segment operating profit was ¥191 million for the same period of the previous year).

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