Baroque Japan: Summary of Financial Results for 2022

Consolidated financial summary for

Baroque Japan Limited

Financial information for the year ended February 28, 2022

Tokyo Stock Exchange, 3548

English translation of the original Japanese report

Content

1. Management discussion and analysis 2

(1) Summary of Activity 2

(2) Financial Review 2

(3) Cash flow review 3

(4) Future outlook 3

2. Basic approach for the selection of accounting standards 3

3. Consolidated accounts 4

(1) Consolidated balance sheet 4

(2) Consolidated income statement and consolidated statement of comprehensive income 6

(3) Consolidated statement of changes in equity 8

(4) Consolidated cash flow statement 9

(5) Notes to the consolidated financial statements 10

(Note on going concern) 10

(Change in accounting method) 10

(Additional information) 10

(Segment accounting) 10

(Information per share) 10

(Later Events) 11

To note:

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

The Japanese version shall prevail.

1

1. Management Discussion and Analysis (1) Activity Summary

During the fiscal year ended February 28, 2022, the Japanese economy experienced a slowdown and recovery several times due to the frequent issuance of the state of emergency and the quasi-emergency Covid-19 in all the countries. In addition, the difficult business environment persists, with concerns over rising commodity prices and rising crude oil prices and transportation costs mainly due to increased geopolitical risks.

In these circumstances, the Group’s domestic activity was affected byafraid to go out until the first half of the year, however in the third quarter of the current financial year, the flow of people has recovered due to the lifting of the state of emergency, and at the same time, the temperature dropped, and showed solid performance. Then, in the fourth quarter, despite the impact of the rapid expansion of the Omicron variant, domestic sales for the fiscal year ended February 28, 2022 increased year-over-year. In addition, CE sales increased 110.6% year-over-year due to the successful promotion of OMO measures using SNS. As a result, in the fiscal year ended February 28, 2022, domestic sales and gross profit significantly exceeded the same period of the prior year.

In addition, as the company continues to work on cost reduction, the SG&A expense ratio has improved year-on-year, and operating profit and recurring profit have significantly exceeded the same. period of the previous year.

With regard to American business in overseas trade, brand recognition for wealthy individuals in North America has increased, and the demand for luxury denim made in Japan is still strong, and by promoting a business model centered on EC and wholesale (for luxury department stores and some stores), the activity in the United States has grown considerably. Regarding the Chinese joint venture with Belle International Holdings Limited (hereafter Belle), our strategic business partner in the joint venture, in the first half of the year, however, business performance was strong due to the spread of the Covid-19 epidemic in China from last fall, although it was affected by action restrictions in the second half of the year, CE growth also contributed to a significant increase in sales and profits of Chinese activity compared to the previous year.

Regarding the number during the fiscal year ended February 28, 2022, the number of domestic stores was 367 (278 directly managed, 89 franchised) and the number of overseas stores was 6 (4 managed directly) for a total of 373 stores. In addition, the number of Chinese retail stores operated through the joint venture with Belle reached 332.

As a result of the above, during the fiscal year ended February 28, 2022, consolidated revenue was 59,139 million yen (16.9% increase over the previous year), profit operating income was 2,752 million yen (109.7% increase over the previous year), recurring profit was 2,846 million yen (139.7% increase over the previous year ) and net profit attributable to shareholders of the parent company was 1,471 million yen (291.6% increase over the previous year).

(2) Financial Review

Total assets, liabilities and equity for the year ended February 28, 2022 are as follows:

(total assets)

Total assets at the end of the current consolidated fiscal year increased by 288 million yen from the end of the previous consolidated fiscal year to 38,632 million yen.

This was mainly due to decrease in cash and cash equivalents of 913 million yen, increase in notes and trade receivables of 868 million yen, increase in inventory of 631 million yen and decrease consumables of 126 million yen.

(Passives)

Liabilities decreased from 1,236 million yen to 16,194 million yen from the end of the prior year. This was mainly due to the decrease in notes and trade payables of 543 million yen, the repayment of interest-bearing loans of 1,125 million yen, the increase of other payables of 184 million yen, and the increase of the current tax payable of 259 million yen. yen.

(Equity)

Equity increased by 1,525 million yen to 22,437 million yen. This was mainly due to the decrease in retained earnings of 1,158 million yen for the payment of dividends, the increase in retained earnings of 1,471 million yen 2

of net profit, the increase in the foreign currency translation reserve of 630 million yen and the increase of Ncontrolling interests of 582 million yen.

  • (3) Cash Flow Review

    Cash and cash equivalents decreased from 913 million yen to 15,010 million yen. A summary of cash flows during the year is as follows:

    Cash flow from operating activities

    Net cash provided by operating activities totaled 1,995 million yen, mainly due to pre-tax profit of 2,574 million yen, depreciation of 811 million yen, increase inventory of 621 million yen and income taxes paid of 527 million yen.

    Cash flow from investing activities

    Net cash used in investing activities totaled 823 million yen, mainly due to the purchase of property, plant and equipment of 452 million yen and the purchase of intangible assets of 390 million yen.

    Cash flow from financing activities

    Net cash provided by financing activities totaled 2,288 million yen, mainly due to new short-term borrowings amounting to 2,000 million yen, repayment of short-term borrowings amounting to 3 000 million yen and payment of dividends at 1,158 million yen.

  • (4) Future prospects

The Covid-19 epidemic has not been contained and has been prolonged, and the impact of action restrictions as infection control measures on the economic activities of each country is significant, and it will take more time for the full-scale recovery of the global economy. In addition, rising raw material prices and distribution costs are being felt and the future remains uncertain.

Under these circumstances, in order to promote the tightening and strengthening of our constitution, we will focus on selection and concentration, improved profitability, and improving the competitiveness of brands as a priority strategy for the internal market. Promoting initiatives such as making buildings that don’t overproduce, improving business efficiency and customer convenience by strengthening OMO, imparting new “culture” and improve brand value and recognition by offering a richer life. Moreover, as a basis for support the business, we will proactively make investments that will be the basis for future growth, such as the renewal of core systems, and in addition, we will work on reforming supply chain management and promoting cost reduction measures.

With regard to overseas business, we will continue to position China as a priority medium and long-term strategic region and strive to strengthen our business management system while maintaining continued growth of our business in China. In addition, while promoting product planning capacity building for China, we will further strengthen our efforts to expand new sales channels such as TikTok for EC. Also, regarding the US business, we will work to further expand sales channels in the CE and wholesale.

Regarding new businesses, we will use our strengths such as sales power and expansion capabilities in China to create new businesses that contribute to the realization of a sustainable society.

2.Basic approach for the selection of accounting standards

The Group prepares its consolidated financial statements on the basis of generally accepted accounting principles in Japan in order to allow comparisons with previous years and with other companies.

Regarding the adoption of International Financial Reporting Standards, we will continue to assess the internal and external environments before making a decision.

3

3. Consolidated financial statements (1) Consolidated balance sheet

(Unit: million yen)As of February 28, 2021

As of February 28, 2022

Assets

Current assets

Cash and cash equivalents

15,924

15,010

Effects and trade receivables

8,001

8,869

Inventories

4,918

5,550

Consumables

197

71

Others

348

343

Total current assets

29,390 29,846

Fixed assets

Improvements to the building and rental premises (report)

Earth

Construction in progress

Other (net)

1,317 1,055

350 350

32 12

74 78

Total property, plant and equipment

1,773

1,496

Intangible assetsSoftware

701 568

Others

118,402

Total intangible assets

819

970

Investments and other assets

Investments and advances to associates

1,597

1,603

Rental depositsDeferred tax assets

3,232 3,159

1,426 1,503

Others

102 52

Total investments and other assets

6,359

6,318

Total non-current assets

8,952 8,785

Total assets

38,343

38,632

4

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