J. Front Retailing Co., Ltd. (3086) Earnings Call Transcript & Summary

[Interpreted] Our group promotes sustainability management and believes that people are the greatest management resource for achieving management goals, and that without the growth of human resources, the company will not grow and advance. We regard our employees as our treasurer and aim to realize human resource development by maximizing their individuality and abilities. Furthermore, what the COVID-19 pandemic reaffirmed for us is that the future is not on the extension of the past. As we have said at the announcement of our financial results, FY 2022 is a year of gear change toward full revival and regrowth as well as the starting year of our unique evolution with diversity and future orientation. Today, I would like to explain what J. Front Retailing is aiming at for human capital management. Before I get into the main topic, I would like, first, briefly to talk about the JFR Way, a concept we do believe, and I always mention JFR Way whenever I get to talk to my colleagues of the company. This is our 5-point and action guidelines, which we set forth in conjunction with our group vision, inventing new happiness in life in 2017. Allow me here to introduce in those prices, we have created, create the future, try without the feel of failure, introduce new ideas, act for yourself, be sensible and honest. These are the phrases. I believe that these were simply express what we must honor in the time of great change. I have intentionally indicated these words on this page because they are not only the guidelines of conduct that I expect of our employees, but also these other words I refer to in order to pick up or encourage myself. I mentioned earlier that the future is not on the extension of the past. The major factors behind this belief are our business models have become obsolete and our business portfolio is not resilient enough. Within COVID pandemic, we were requested to close our stores and restrict human flows. For our department store and shopping center businesses, we found ourselves in a totally helpless situations because almost all our touch points with our customers are our brick-and-mortar stores and our department stores. This has made us be keenly aware of the need for digital touch points, and we have been working on such initiatives. But once again, we feel that human resource capabilities are essential for us to promote transformation and regrowth through the use of digital technology. Of course, we need to have expertise in our human resources, but the most important thing is to develop human resources in the Gemba field. The same can be said for the development business, which we view as the most important business for portfolio transformation. It means that innovation cannot be realized without developing the motivation and the ability of people to raise the [indiscernible] for change and to link the diversity of the organization to value creation. Needless to say, promoting human capital requires synchronization of management and human capital strategies. Our group aiming at business portfolio transformation and business model reforms has 3 growth strategies: real digital strategy, prime life strategy and developer strategy. We believe that the human resources strategy necessary to realize this goal is to develop and secure specialized human resources, assign and activate group human resources and build R&D functions and systems for business creation. In terms of training and hiring professional human resources, we are actively recruiting career professionals with the specialized skills, experience and knowledge required for new growth fields, such as digital and development expertize, but it is becoming increasingly difficult to hire such people every year. More than ever, we do believe we must work for develop particularly young employees within the company. Regarding an assignment and activities of group human resources, we are now executing them with a sense of speed, aiming to optimize both the human resource capabilities of each individual person and the group's strategy. Specific initiatives include efforts to increase the ratio of career hires from outside the company to 50% in the holdings and the placement of PARCO human resources into growth fields. In the past, when we attempted to establish R&D functions and systems for business creation, though we tried new fields we experienced difficulties due to the absence of supporting divisions or lack of budget. The business portfolio transformation promotion division was newly established in order to solve this problem. In March this year, the group digital unit and the CRE planning were also newly established within the holdings. And these units have begun working to synchronize management and human resource strategies. Since its inception, 6 months have already passed. Today, we would like to expand on some of our activities for human resources. First, Mr. Akira Umebayashi, Executive Officer and Human Resources Strategy Division, will explain our group human resources strategy. Then we have Mr. Taiichi Nomura, Group Digital unit; followed by Mr. Shimogaki, Business Portfolio Transformation Promotion Division. We also have Ms. Koide, outside Director. She will explain our governance situations as well as issues from the perspective of an independent outside director. Then we'll move on to the Q&A session. So please feel free to speak up. Now on, Umebayashi, please.

Now I would like to give an overview of the group's human resources strategy revealed the history of the strategy and also talk a little about the specific initiatives that are currently underway. First, I would like to show you this very first slide. Our human resources strategy is characterized by the fact that although Daimaru had been a stand-alone company at that time, we launched the management reform initiatives in 1998 with a large-scale restructuring of the company. At the same time, we made a major shift in our personal system and human resource strategy to the so-called job type personal system. For the past 20 years, we have promoting management reforms based upon the job-based personal system, while taking into account the subsequent integration with Matsuzakaya Holdings. I believe this has been the most important point and the characteristics. On the other hand, as Yoshimoto mentioned earlier, we have started a new management reform as well as selling a new group vision. In line with this timing, we have been shifting the basis of our personal system approach and [indiscernible] to a human resources capability oriented. This indicates that now we are making a shift to a long-term development and investment. On the next page, we provide a specific definition of human resource capabilities. This may be somewhat unfamiliar term to you. But may I remind you that this is our original ways of thinking. As you can see here, we define job performance and ability to create new values as the human resource value in the middle, which is colored in [indiscernible] color. In this era of [indiscernible] where it is rather difficult to foresee the future. We are promoting our human resources strategy by focusing on the will and the motivation of each individual and their ability to learn in order to cope with the change. These competencies are rather invisible to the naked eyes, but we will use all kinds of assessments to visualize them and to promote and grow human resource capabilities. And this has become the core of our human resource capabilities policy. I said it on the right, we believe that human resource capabilities are the very essence of human capital, which expands and growth if it is polished and shrinks and become solid if it is neglected. We do believe that growing and advancing this human resource capabilities lead us to our company growth. Next page, please. As I have just mentioned, we believe that the growth of human capital is going to be the growth of the company, and we aim to create an autonomous value-creating partnership where individuals and companies are chosen and selected for their positions and relationships. The human resources that we will invest in, and that will support our priority initiatives will be those autonomous individuals who are motivated by their own motivation and who will voluntarily raise their hands in support of the vision and the goals of our company. Finally, I would like to explain some of our current specific initiatives and key issues in our human capital strategy. As mentioned on the previous page, we do believe that the internal motivation within each person is the source of new businesses and new initiatives. In this context, we are working to expand internal requirement or restructure our supporting menu in order to encourage each individual to consider his or her own career autonomously. In addition, we have been working on various projects and expanding the number of open positions in order to encourage those human resources to raise their own hands and play an active role across the group. We believe that this has led us to the mobility and the revitalization of human resources in the first half and in the current second half as well. Another important issue is to develop and secure specialized human resources, which are indispensable for the growth of each business segment. Since the characteristics of each business naturally differ, each operating company is working to improve the existing skills and/or identify the skills that are necessary. We'll not only produce digital skills from outside the group, which we consider to be particularly important but also we need to work to bring these skills in-house. After my presentation, the person in charge would like to expand on these activities later. As mentioned in the JFR Way, we must move forward in a future-oriented manner, and we do believe it is going to be important to change our organization and the culture of the group. As I mentioned in the outset, we are establishing and structuring the CVC with the intention of creating a place where employees who raise their hands based on intrinsic motivation can play an active role. The person in charge will expand on the specifics of this idea later. That's all for me. Now Nomura would like to talk about additional core human resources.

Let me briefly introduce myself. I joined JFR just this April. Until then, as you said, I was working for an airline with ANA, where I design the businesses of customer service lines such as reservations and ticketing and check-in. I believe some of you have privileged experience the Internet reservations and touch style boarding, and I designed all of them for your information. After leaving ANA, I joined the [ PH ], Japan's very first LCC as a founding member. I was actually employee #4 and I learned how to design schemes in the fast-paced environment of a venture company. Then I joined ANA again by turn of fate, so to speak. And since then, I was deeply involved on the digital side. And as you can see on the sheet, some of my designs have received awards, and I'm truly grateful for this. My domain covers creating systems using data and business design using technology. But since joining JFR, my main focus has been on developing human resources that support the digital businesses. I would like to mainly talk about this today. Next page, please. DX has now become a buzz word. And if you look at the media, you'll often get to see articles and talking about creating some kind of platform or they train hundreds of thousands of data scientists. This is not necessarily wrong, but the building platform or the hiring scientists, for example, should not be the goal itself. The point is how the company can continue to create values beyond that point. You see the picture of a tree. Just because you have created a system on hire person with such skills, it does not mean that you can guarantee a lasting possibility of the company. In order for the tree to flourish, it is necessary to have the soil and the processes in place for it to thrive. In other words, we believe that it is necessary not only to nurture human resources, but also to nurture and develop process of nurturing human resources. What we are now paying great attention to in developing human resources is the importance of linking the creation of systems and human resources development and the business processes, the kind of systems I have just mentioned. Of course, each one of them is going to be quite critical, but the integration is more important. In addition, it is often said that human resources development is done only through training and skills, statistic analysis and various tools, but I strongly believe that the key here is you need to have such a mindset and knowledge, and you need to further integrate and link them with the functions of the organization. The next page is a picture describing the points. Sorry, it's a bit too small. I'm a little bit embarrassed to show you at the bottom left and showing we are still wondering what to do. But we have defined 2 types of digital human resources. In the pink section, we have defined data analysts who mainly utilize data. And in the bottom right, in blue, we have defined digital designers who design new businesses using technology. Of course, the skills I mentioned earlier and will be assigned to those 2 personalities, but we will also accumulate the mindset we value and the knowledge we have cultivated over the years while creating an environment where these 2 types of human resources can make the most of their skills and talent. This can be achieved through in-house units or by preparing the environment of the system itself. And by having these 2 human resources work together to create the desired value. We envision a new flow of the value creation by combining the value we have created with our strength and assets. So this has been our basic assumption. In fact, we are planning to start our full-fledged education to develop data analysts and digital designers starting from the next month. We plan to train 100 people in 2024 and 1,000 people in 2030. That's the kind of scale we have in mind. We are planning to create 1 more in-house programs every quarter. But here, our basic assumption is that if we have trained 100 people, we will have core human resources in major divisions. If we have 1,000 people trained, we'll have core human resources in all divisions. So that when something is noticed or the problem is identified, we'll be able to create an environment in which everyone can work together jointly to achieve a single goal without giving up. In addition, after these human resources are trained, they are usually assigned to 1 central location, which is referred to as COE, but we do believe that for us, the Gemba field is going to be more important. And we are trying to create values by activating the power of the Gemba field with these human resources. We have a style of assigning these trained human resources to the Gemba field one after another. To this end, the holding company will build a community that provides solid support for those who have been assigned to such positions or by creating an in-house production unit. The holding side will continue to make those series of efforts so that the trained people can fully function after they are trained. Today, I'd like to quickly share with you 1 example of our education. In order to enhance practical capability, we use workshops. You see final illustration of insects here. It is to make digital and system more familiar to members as some people are still slightly intimidated by the mere thought of this. We use different insects depending on case [indiscernible], honey bees and so on. We'd like to develop HR so that they can address issues through workshops. They are original workshops, and we will incorporate them in our HR development process. Once we made these workshops, we wanted them to be known widely in the group, not only among limited members. And in this October and November, we visited stores and let employees experience the workshop. In 2 months, about 250 members joined the program. We want to let them know the upcoming movement. But at the same time, through the feedback we learned how it can be more effective and clearer. And what is currently required. And we'll modify the workshop based on these learnings. And I think this is one of the benefits of in-house program. To connect to Mr. Shimogaki, let me show you this example. In the program, workshops for new business are included. You see 2 ladybirds. And today, let me talk about a yellow ladybird on the right. We have various assets, including data places and people. As for the target customers, for example, we can target the new reach or affluent people. And we can narrow down these conditions. So for example, with these 3 conditions as shown here, we can explore the possible services or ideas in workshops. This process is repeated over time since the workshop. And in workshop, 10 to 20 ideas are created. And out of 10 to 20, you find 1 or 2 ideas to make you wow. And we vote to finalize today's achievement, people from different divisions and diverse wisdom get together, and we can find a new idea and new light. By sharing the experience together, we can share the potential of future transformation. Through these initiatives, we'd like to create that brighter future. Thank you.

I'd like to present the CVC initiatives. As for my profile, I joined Daimaru, Inc. in 2007. I was assigned to Daimaru Umeda store. After serving in the sales front for 5 years, I moved to the sales promotion department in the same Daimaru Umeda store and engaged in the strategic planning for a large-scale renewal and also a large project under our theme of Femtech. In 2019, I moved to Management Planning division of JFR Holding Company. And now in 2022, I lead the launch of CVC Fund in the business portfolio transformation division. Now I work concurrently for ignition pointing venture capital that work with us in CVC fund, learning the management through a venture capital perspective. Next page, please. Today, I'd like to introduce JFR MIRAI CREATORS Fund. Our CVC has R&D function in new business creation through investment to the start-up companies with innovative technology and business model so that JFR will be the innovative corporate group, which should be able to create new businesses continuously in 2030. By combining business seed outside the group and ideas within the group, we aim to contribute to 3 purposes, creation of new businesses, development of manager talent and the evolution of corporate culture for creation. And we aim to evolve and activate our corporate culture for creation through the CVC activity participation by about 4,800 employees, about 50% of total headcount. So investment is only a part of our CVC and it plays a role and [indiscernible] of promoting innovation. Next page, please. As for what we want to accomplish by CVC, I said that the investment is only a part of CVC. Vision and roles of CVC are described on this slide. The vision for 2030 is innovative corporate group that continually creates new businesses. To realize the vision, the roles of CVC are stimulating the intrinsic motivation of the group employees to encourage new challenges. And combining the challenges of the group employees with people and companies outside the group to increase the probability of success. By maximizing the conduct opportunities between group employees and the start-up companies with innovative technologies and business models, we'd like to stimulate an intrinsic motivation. We are convinced that the accumulation of such steady efforts will lead to the collaboration with external entities and create chemistry. First, Group employees, including myself, should pay attention to the external world and should be aware that the company is not the entire world. Next page, please. To let 4,800 employees participate in CVC activities in some ways, there are mainly 3 factors that we can offer, as shown here, providing opportunities for information dissemination and sharing. Second, providing opportunities for external contact. And third, providing knowledge and know-how. Through these 3 initiatives, we'd like to expand our activities. Personally, I believe that one can be unexpectedly gravely affected by the people close to oneself or encounters and opportunities. Some members of our CVC team said that they were greatly affected by the familiar people who took on challenges of new business creation and they were stimulated in the volunteer to be the members of the project. So as shown at the bottom, first, we need to add logs on the fire year for employees leading transformation and the fire were spread to the employees in the next layer, who challenged transformation. And furthermore, to employees participating in CVC and expect employees in different layer, we continue to take on challenges on their own. Next page please. Let me walk you through the overview of CVC fund. It is named JR MIRAI CREATORS Fund, with a wish of supporting all those who create future. Fund Vision is making the future better and more interesting. There are 2 subjects to create new value. First, in people's lifestyle, we will update the quality of individual life and work style and how they spend their time. And second, in people-to-people relationship, we update the relationship connections and communication with others. Everyone in the world, including many of you and myself suffered heavily in the COVID pandemic in the last few years due to the division between individuals. But to achieve the planned vision of making the future better and more interesting to update the people-to-people relationship is indispensable. So we'd like to cherish this value creation. As for investment areas, there are 3 group strategies pillars, i.e., real x digital, developer and prime life strategies and by combining them with a new business project of the holding company and operating companies, we set 5 focused investment areas as shown at the bottom, namely Entertainment, Healthcare, Proptech, Retail tech and Deep tech. Over the investment period of 5 years, we'd like to invest in 20 to 30 project. Finally, going through COVID pandemic. How did I get myself motivated to launch the CVC? I have been devoted to deliver the good news to all group employees. As I said before, since I have been on the operational side for 12 years, I know how store members suffered painful time when customer traffic visibly decreased due to the pandemic. There were times that we had to close stores. News that group companies will be divested once runs through the company. In this context, I believe that CVC activities are the initiatives for the future. I wanted to deliver good news that the company makes solid investment for the future to create future believing that this bright sign will uplift the motivation of fellow members in the group who work together. I have been taking on challenges without fear of failure. I'm now pleased that I was able to deliver this good news of CVC for the creation of future. And this is not the end. We continue to make 20 to 30 exciting investments to create the future. I'd like to continue to deliver a series of good news to the group. We have been implementing CVC initiatives for 2 months. In the process of informing the initiatives throughout the group, there were many happy development. I have received contents from many employees from whom I didn't know before, ranging from new employees to senior veterans of 58 years old. Now we see many new challenges are being taken through CVC, and we see positive feedback of the expanding movement to take on challenge without fear. We continue to work vigorously with all group members united to promote the initiatives to make future better and more interesting. Thank you.

Next to meet you. I'm Hiroko Koide. I have been serving as an independent outside director since last fiscal year. I have been engaged in the business strategy, brand development and nurturing, marketing and innovation at global companies in the United States and Europe. Today, I'd like to talk about the current state and challenges of the company's governance from an independent outside directors perspective. As you know, our company transitioned to a company with Nominating Committee in 2017, and I think we are still minority in Japan and currently exploring ways to transition from Advisory Board to Monitoring Board. Our ultimate goal is to entrust the management executives to a considerable part of the work from decision-making to execution with the supervision by directors. To that end, the Board of Directors have been working through a number of trials and errors. This is today's agenda. I'd like to discuss 3 points, namely the company's governance initiative, future challenges and expectations and expected roles of independent outside director from an independent outside directors perspective. This slide shows governance initiatives. Every company works on this seriously, but we need to be careful to ensure that the governance is not the objective, but a major or a mechanism to make right decision to ultimately in his corporate value. Of course, form is important. But what matters more is how the top management and the executive members think about it. And how are they believing to move to execution? To that end, it becomes more important than ever to have a truly trustful relationship between members of supervision and execution and work together as partners. In this context, I'd like to review the current state of the company's governance initiatives. Let me start with the positive side. The company makes steady progressing attitude or mechanism to enhance governance. I have many opportunities to talk about these points with external people and they highly recognize this aspect. In particular, I feel the top management leadership and governance commitment, their seriousness on daily basis. And I think they are extremely important. I also think the strength of the company lies in the very frank exchange of opinions in the committee and Board meetings. Opinions for corporate value enhancement may vary, but I think to be able to have a constructive and open discussions between internal and external directors is particularly important as a foundation. They speak out very openly in making advice based on their experiences and pointing out the potential risks. So I think this very open exchange of opinion. I think this very open exchange of opinion is commendable. Of course, it is wonderful that these basic designs and the requirement for forms are well developed and sufficiently met, but additionally, it is also more important to ensure the Board and the 3 committee meetings are functioning properly. This was evaluated in the form of effectiveness assessment of the Board of Directors, and the directors share the awareness of issues properly. This process is critical, and I think it works very well. Last year, it was pointed out in the assessment of the Board that the role of the holding company needs to be clarified. And there were questions over the role of the operating companies and the holding company, including the perspective how PARCO can be integrated. This was the first major issue raised in the effectiveness assessment in the previous year. Second, the Board of Directors should focus more on the strategic discussion. This opinion was also raised in the effectiveness assessment in the previous year, and it was raised from both of the internal and external members. Third, it was pointed out that the competition of the Board of Directors can be reviewed and improved further. As for the composition of the Board of Directors, as shown on this slide, in this fiscal year, it was revised significantly to have majority of outside directors, 6 out of the total number of 10, and there are 3 women out of 10. I work for other companies concurrently. But compared to those other companies, I think we are considerably more advanced. The review of the composition of the Board of Directors, though some members have been serving as directors of holding company and operating company concurrently up to the last fiscal year. The concurrent question was eliminated, and I think that helped to clarify the role of the Board of Directors of a holding company. As for committees, progress has been made so far for the Nomination Committee. And of course, the most important agenda of this committee is the succession plan for the management team. And we have made various progress with the help of outside experts such as diagnosing management personnel and conducting interviews. The remuneration committee revised the remuneration system for officers with the start of the medium-term management plan last year and we have made a certain amount of progress in establishing remuneration system that is properly linked to management issues. Management strategies and evaluations of those strategies. In addition, as you can see on the bottom of the slide, we have a monthly executive session, where only outside directors gather to discuss issues, and I feel this has been very effective. For one thing, it is unexpectedly difficult to have dialogue among outside directors during Board meetings and having a different forum allows us to freely exchange information and opinions as well as share awareness of issues, and this has become a great opportunity to strengthen our cooperation, especially for someone like me, who has just joined the Board recently. It is a very meaningful forum where I can hear about the background of the current agenda from those who have been in the Board for a long time. And as such, information can be passed around among outside directors. We invite the President to a discussion at an expanded executive session sometimes, depending on the agenda. But since this is not a Board meeting, it is more about deepening mutual understanding and frankly, discussing questions we have. Sometimes we stimulate each other to develop ideas further by ideas of others. We are leveraging this meeting as a very meaningful place as well. There are many things we are improving and briefly describe about them on the next slide as what we have achieved. One of the issues mentioned earlier was the clarification of the role of the holding company. And the Board of Directors recognizes that this is an extremely important issue. We are talking about the need to clarify the role as well as strengthen its unifying power. Of course, the relationship between the holding company and operating companies and how the roles and responsibilities are positioned will differ from company to company. And I think it also depends on the phase the company is in. In our case, we are still in a phase of reform and change and assume that a certain level of top-down reform is quite important. There are various reforms that need to be carried out across the entire company. And the outside directors have repeatedly stated over the past year that we should clarify the role of the holding company and strengthen its unifying power in order to promote these reforms all at once. The President has made a wise decision to actually put this into practice. And I think the company has achieved a great deal of organizational reform and integration of human resources this fiscal year. It should be recognized that the holding company has established a new department that will be necessary to implement cross-sectional reforms in the future. And the company has assigned human resources from PARCO who have strength in relevant areas to the new department for a true integration of PARCO. Also, the appointment of a young person as the head of the department, which I think is a form of age diversity, was a very bold decision and a drastic organizational reform. All outside directors feel it was very good. With these efforts, one of our strategies, the developer business has been established and are taking shape as an operating company. And I think this is one of the progresses or achievements we have made this year. So there are many positive aspects. But in actual business operations, there have been many difficulties due to COVID and financial numbers are not always as good as expected. I think the focus tends to be on the recovery from COVID. And there are a number of issues are left to be addressed. For this reason, I would like to see the company work hard on these issues. And as an outside director, I will provide my support as much as possible. What kind of issues are particularly significant is described below. The first point is about the current medium-term business plan for FY 2021 to FY 2023. Basically, we are trying to restore sales to the pre-COVID level of FY 2019, so we have not set out a vision of doubling sales or anything like that. But this includes actions that will lead to the next medium-term business plan. It is important to monitor them closely. Regarding this monitoring, I think it's important to set new KPIs to monitor first. Only with those KPIs we can measure what progress is being made towards success. And in fact, this is still a weak area and while, of course, there are reports on individual cases, monitoring based on KPIs from a bird-eye view is not yet being done properly. The outside directors always point out that we want to see major improvement here. The second point is a bigger one, I suppose. It is raised as the first agenda for the future in the effectiveness evaluation of directors this fiscal year. That is thorough discussion to agree on the business growth strategy. I have always said that we need to put the group strategy which will lead to the improvement of the corporate value from a medium- to long-term perspective at the center of our discussions, and that is what we should spend the most time with focus and the discussion at the Board meetings. We are always asking this question to the Board of Directors. What is the vision of the company you want to achieve in the first place in 5 or 10 years from now, not just for the next medium-term management plan. Do you really want to grow only within the retail business as we think of it now? And can you do that? Or perhaps the definition of retail business itself need to be changed. I expect the company will have thorough discussions about if we should expand our focus away from the retail business into other areas and an overall vision for the ideal company. Based on that, a new business model will be built. Of course, I think we all know that we can't grow anymore just by making what we have a little better. I think everybody knows that it will not be an extension of the current status. But even so there are still some aspects that are affected by today's business. I think we need to think over and create a new business model that will change the definition of the market and create a new value. With this in mind, how should our business portfolio be built? The company has 4 business segments, but can each of them grow as they are? Or will they be reconfigured or will completely new business areas be added? I don't have an answer to that question right now. But the outside directors have always been saying that we want the company to think about the business portfolio with such a sense of rejecting the status quo. To put it in a next-gen way, I question what would you do if department stores were to disappear in 10 years' time? I suppose it is difficult to completely deny themselves for those who currently engage in the department store business. So this is the point where I want the leaders of the holding company to develop a strategy. The third point we have raised is acceleration and implementation of transformation. I think this has been raised by other outside directors in the past, but we feel that the speed is still too slow. It does not mean you just need to rush. What is important is that when you start something new, you should create a proper road map first that combines indicators and the overall schedule. I understand that some can be done quickly, while others require 5 or 6 years to produce results. But by making them all visible in a single map, we will be able to monitor them properly. We don't have to do everything in a hurry as we need to work on some things patiently and perseveringly. We always ask the company to submit the proposals that clarify those points clearly in an overall picture. The last point we have raised is related to the point Mr. Umebayashi mentioned earlier. The growth strategy is ultimately dependent on the human resources that support its implementation. So I want to see clarification of what are the strategic human resource policy and the remuneration system that support them. No matter how good a strategy is, it is the people who execute it in the end. So I would like the holdings to take the lead in this area as well and make a solid human resource strategy for the entire group. That includes hiring people like highly specialized digital human resources. And with the establishment of new companies, there is an increasing need to hire the type of people that the company didn't have before. Also, once they have joined the company, the entire group should work on how it can retain them for a long time and develop their skills. They will not stay in the same operating company they join forever, and it is necessary to have a comprehensive long-term development plan about how they can move up the ladder while gaining a variety of experiences. I also believe that diversity is the source of this kind of change. It is often said that Japan has a strong culture of peer pressure, and diversity is very important to break this culture, and I expect the company to focus on this point. [indiscernible] agenda setting will be very important at future board meetings. I expect agenda setting will become a major role of the Chairperson of the Board throughout the year as to how much time should be spent on what kind of agenda with priority for discussion. As I mentioned earlier, a company with a large core business, in our case, the department store business has a long history and is large in size and it would be extremely difficult to deny such a business and look for new areas. I believe that the holdings will play a major role here. We always hope that the holdings will take the lead in promoting reforms in this area. When we take on a new challenge along this path, it is very important to decide who is going to do it, and it can't be just anyone. During times of change, it is essential to identify people who can passionately tackle on new things to accomplish the challenge, no matter what. Who will be leading the transformation and what kind of hypothesis should be tested to make a small seed grow? I'd like the holdings to take the lead in this hypothesis setting and verification and make firm decisions to move forward. The last slide is about the expected roles of independent outside directors. I know there is a lot of talk about this. And of course, we have a role of putting a break on the management to hold back their recklessness and to prevent fraud. But at this point in time, I think the role we are expected to play is rather the opposite of that. For instance, we need to bring in outsiders' perspectives to challenge if what is considered as normal within the company is really the right thing to do. And there are many people in the company looking to traditions and success in the past. I think only outside directors can speak to such people in the management from a perspective that is not bound by the past or history without reading that emotion too much, and I want to make sure to do so. There are various projects, and when we think about them, we should use the perspective of how they would be viewed by the capital market. And customers and consumers are especially important stakeholders in the retail business. So we take a step back and ask ourselves whether this is really meaningful or valuable from the customers' point of view. We are also consumers ourselves. So we want to be able to challenge like is this really the right thing to do based on our own experiences. Also, there will be many risks involved in implementing various new things in the future. But nothing can be done if we are just cautious all the time. So we want to play a role to support needed risk-taking to some extent, but that should not be for making just emotional or sentimental decision-making. Rather, I'd like to ensure that fact-based discussions will be held in the Board meetings to decide to take risks with full understanding about existence of those risks. The last point is the diverse experiences and networks that outside directors have, we also have our own personal networks outside the company. I hope the company will actively leverage such networks to access the knowledge and industry they need. Lastly, I have one point that I always tell myself to be careful about as an outside director. Of course, there is no end in providing advice if I go into details, but I understand our position and role should be to create a standard and discuss with frameworks from a strategic point of view as much as possible and not go too far into the details such as implementation of measures or regulations. I'd like to lead discussions using cross-business theories and frameworks and strategic discussions. For instance, when the Human Resources Department hires people, as an outside director, I want to be able to say things from the perspective of not just who to hire, but what is the type of person they hire for the growth of the company. I have talked too much, but I will continue to support the management of the company by keeping a close eye on the various thoughts of our stakeholders. Thank you.

We'll now begin the question-and-answer session. First, I would like to have Mr. Takahashi from Mizuho Securities.

This is Takahashi from Mizuho Securities, and thank you very much for your detail and wide-ranging explanation. Your explanations were very thought-provoking and very informative. Let me ask you on 2 major questions. First, I would like to ask Mr. Umebayashi. You mentioned that you shifted to a human resource capabilities type from FY '19. But I think, if I'm not wrong, even before FY '19, you have some of the propane systems to develop employees. Actually, Ms. [indiscernible] was involved in that process. I appreciate if you could give me more specific thoughts. Again, what has been the major changes since FY '19? So this is what I'd like to inquire here. In addition, I think you mentioned on the last slide earlier that you said KPIs are to be synchronized with the future vision of the group. I would like to know exactly what kind of KPIs you are talking about here. I appreciate if you could expand on this to the extent possible. This is my first question, please.

Thank you very much. The reason why now we have pivoted for human resource capability is that the personnel system that had been in place since 2000 was job-based. And the idea was to measure the value of a predetermined job, put a price on that post and then assign the most suitable person to that post based on the so-called present value of the job. But on the other hand, at that time, the concept of inventing the new happiness in daily life was being promoted. This was a major shift in management posting toward taking on challenges of the unknown in this year of the [indiscernible]. We want to steer the company not only toward efficient management, but also toward the challenging the unknown. In doing so, we will have to take new challenges in -- we need to find more suitable people in this area, we have never done. So it's very important for us to fully understand the potential of the person equation as well as future possibilities. So this has been a major shift that we started working on. So it's kind of the other way around. So we decided to pivot back, so to speak. Therefore, in terms of compensation itself, we do not pay the salary just because the person is assigned to the position. But rather, we give them challenging jobs. And if they are able to complete that job, as a result, we will reward them accordingly for their achievements. I hope you understand that have changed. Our overall post so called role based or the promotion to be followed system. So that, for example, younger workers can go for more difficult and challenge jobs. I hope you understand this. Another KPI for the future. Of course, we can set KPIs based upon external factors, including the so-called factor structure. But for example, we are trying to increase the ratio of women in management positions. As you know, in our group companies, women now already account for about half. For example, we will not only focus on the ratio of women in management positions, but also on the wage gap between men and women which we will be required to disclose from the next fiscal year onward. In other words, if more and more women are assigned to higher-paying and more valuable jobs and if they are able to demonstrate their outcomes, we will naturally compensate them which is right for the outcomes. For example, if such momentum occurs toward narrowing the wage gap between men and women, it will naturally become important to track that as a KPI and actual profitability will also increase and our corporate value will also rise. We'd like to create such a good cycle. Well, we are still in the [ transit ]. We would like to synchronize this with our new MTP starting from FY '24. As [indiscernible] mentioned earlier, we would like to inform the KPIs that will lead to the better business performance and the corporate values. We will definitely keep an eye on this going forward. I well understood it. Thank you very much.

My second question. Sir, now I would like to ask some question going to the 2 people, Ms. Koide and President Yoshimoto. You identified your efforts to develop your resources in parallel in solving a variety of challenges explained by the Director Koide. Then you can connect your efforts to the next MTP. In this context, I do not think you have come up with a clear answer what you're going to do now for the next MTP. So would like to ask each one of you from your own position, what are the fundamental values that J. Front has and what must be kept and what must not be changed in the MTP? What are the core values of J. Front and how you would like to actually have been protected, how you'd like to go along with this and the thoughts? Any thoughts I would like to welcome, please.

Allow me, Yoshimoto, first to respond. The next midterm plan will start in FY '24, so we are still 1.5 years ahead. And we are still trying to share the broad and the firm vision of FY 2030. And we are not wishing to backcast from there. I don't think we have ever worked on the context of next midterm plan in earnest as such an early timing. But this time, we have been already discussing it so earnestly. In the midst of these discussions, I believe that when we think about 2030, we should focus on our current strength and in core competencies that will emerge from them. And that this will be inevitably become the basis for our thinking. We have and had a number of discussions among the executives and officers, and now asking the Board of Directors to discuss and give us their opinions on these issues. As Koide mentioned earlier in her role as an outside director, we are told again and again, are you sure what you are doing is truly fine? What's going to happen if department stores have disappeared? Actually, now we have given such a question all the time. I believe it is going to be surely important for us to face up to this question and expanding our ideas back and forth though it is still 1.5 years ahead. In that sense, although the president of the operating companies are not necessarily on the Board of Directors, but it is becoming extremely important for us to talk to them directly. And at the same time, we need to consider how we can take into account what the operating companies are trying to do deciding our direction for us to follow. I think it is fair for me to say that we have not made full-fledged efforts in this regard, so I think this is a really good timing because we are to start next MTP. What are the important things we need to keep an eye on? And what are the ingredients we need to keep in mind? So that's what we are discussing so seriously. Our strength and our competence and of course we have many of them. But again, actually, it was based upon the achievements and actually during the department store days and also the [indiscernible] days. I would like to combine this strength into new core competence, something that only we can do, that no other companies can follow and no other companies can imitate.

This is Koide. As President Yoshimoto mentioned, I think backcasting from 2030 is especially important. Of course, we cannot have a perfect prediction. But as lifestyles and the value of consumers are changing rapidly now, I think to backcast for the medium term rather than considering the immediate upcoming 3 years is very important. Then as to our core competence in that context, owning properties or stores is one of our strengths. But besides this, as our uniqueness, we also have the connection with customer base as a soft power. And it is also our strength. But in the current competition, we established connection with customers when they come to our stores. And I think that needs to be revisited so that we can be connected to customers in some other ways. Turning our eyes globally. The retail business is evolving in various ways. Now it is not simple as to the store attract people. Of course, when Amazon emerged, I think it was amazing. But now online shopping is, in a way, taken for granted and completely different types of business are emerging one after another. And though not all of them, we continue to grow, there may be interesting clues there. So turning our eyes to these emerging businesses, we may be able to connect a few dots which seem to be far apart now. Thus, I'd like to create inspiration and ideas and that is what I have been saying.

Thank you. I think you're still having discussions. So please let me know the updated information, if any. That's all for me.

Thank you, Mr. Takahashi. Next, Mr. Tsuda of Daiwa Securities, I'd like to invite your questions.

I also have 2 questions. First question is for Mr. Nomura and Mr. Shimogaki who are close to the operational side. Listening to your presentation, I learned that employees need to take ownership, take things at their own. But I wondered if there is a gap in enthusiasm between President Yoshimoto and people on the operational side. I think it has not been long since the specifics were materialized. But has the mindset of the people on the operations side changed much? With a better understanding of employees and the key points where they can speed time, have you already come to the point where you can develop HR quickly? Or do you need to push them a little more to move employees? I'd love to have your comment from your respective position.