It is time to start the ZOZO Q&A session for institutional investors for the third quarter of FY 2025, ending in March 2026. We have on the call Director, Executive Vice President, and CFO Koji Yanagisawa, who presented the earnings results. There will be Director and COO Fuminori Hirose, and General Manager of Corporate Planning Office, Yusaku Kobayashi. The session will last until 6:00 P.M. If you have questions, please raise your hand with a button. When you're appointed, please unmute and state your company and name, then ask your questions. Yanishima-san, go ahead. Thank you for the presentation. My name is Yanagisawa from Steve Securities. I have two questions. One is about ZOZOTOWN consignment business. I feel like it was a bit weak. That's my impression. Then you did mention that the fall and winter merchandise was slower, and then from January to March, you undershot your plan. So my question is: Do you think it is possible for you to reach to a 5% level for your growth? And my second question, it's not so much about the earnings results, but it's really about your future direction. So inflation is happening, cost of goods is also increasing as well. And I believe that costs are coming up as well. So cost of goods and also easing of taxes, how would they affect you? So, yes, it is true that that could be both a headwind and tailwind for you. So what do you think about the country's financial situation and how that will affect you? Okay, so the first question will be answered by Hirose, and I will answer the second question. First of all, thank you for your questions. So this Q3, it is true that November and December were big or weak, and then last year, Black Friday took place, and then we also had the sale. So we started off from a quite a high benchmark, and then the situation changed quite dramatically. Last year, we didn't have so much outerwear, and then in the third quarter, we sold a lot of outerwear in order to accelerate the growth. On the other hand, this year, we did have outerwear in inventory, but the brand did not do markdowns, and then we couldn't really sell down the inventory. And you asked about the fourth quarter as well. So the inventory of outerwear, we have plenty of that as we got into the winter sales in January. So, so far, January has been doing well, so there has been some time difference. So there is the GMV budget, so consignment business for ZOZOTOWN as well as LINE Yahoo! So what we would like to do is to continue to aim so that we can achieve the targets. So, we've been talking about the increasing cost of goods. So in that context, the salary is not coming up. The actual income needs to come up. I believe that that is the fundamental event that we need to see happening. And how does increase of cost of goods affect us, our business? So far, it hasn't affected us much, but we are starting to see that the young segment is starting to be affected slightly by the increase in cost of goods. There is a young segment that loves apparel, so it seems as though that segment is starting to be impacted slightly by this. We hope that the lower tax will affect us positively if it happens. Just kind of building on my question about increase of cost of goods. As you mentioned, the young segment is being affected by this. Do you have numerics that proved it? Maybe that is showing in Lyst. But for ZOZOTOWN, when you look at your overall business, do you feel like the young people are starting to be more hesitant to make a purchase? Lyst doesn't have to do with it, but for ZOZOTOWN. And it's not actually evident or prominent impact, it seems like that is starting to show a little bit. That may be starting to show. Okay, let's go to Nagao-san. Hello, Nagao from BofA. I have three questions. First, just kind of building on Yanishima-san's question, I think this is a really interesting topic. So if young segment is starting to have an effect of that, what is the evidence of that? Do you think that's going to affect you in the average retail price or frequency of purchases? What would that show in? And my second question is, GMV growth rate fell short of plan, but EBITDA achieved the highest to date number. So do you think that you'll be able to sustain this momentum for EBITDA, or do you think that this was a one-off result? And my third question is, so there's outerwear, so heavy garments, and you will be affected by the inventory level of, heavy garments. Do you think that your strategy was not enough, to meet the demand because of your product mix, or do you think that you're starting to see structural change there? So that's three questions from me. Okay, so I would like to answer them. So demand of the youngsters... Well, I actually didn't want the investors to react too much to that comment I just made, but the image that I have, the impression that I have is that it, it's not really going to the area of us seeing an impact on average retail price, but it's more about the sensitivity. So I'm not saying that the, you know, average retail price or the frequency of conversion are coming down significantly among the young people, but it seems like it's getting... we're seeing, like, little signs of these, the segment weakening. But that's my nuance. I'm sorry, that was a little ambiguous. No problem. And the second question is about the delivery cost. I think that's going to continue. Okay, the third question, I'd like to answer that. So changes in the product mix, the lineups. So compared to last year, the amount of outerwear did increase, but when it comes to the number of SKUs, we're seeing a decrease in the rest of SKUs. Basically, brands are giving us more volume of the same SKU. That is the change we're seeing this year from last year. Okay. Hello, this is Nagao-san. Sorry, can I ask additional questions? What you're saying is that you're getting more volume of some SKUs, but it still didn't contribute? Basically, we are ch- our strategy was to sell down the inventory with the same strategy as last year, but the SKUs that had a mark- that were offered with markdown prices, the number of those SKUs came down for this year. Okay, let's go to Kazuhaya-san. Hello, this is Kazuhaya from UBS Securities. My first question is about ZOZOCOSME update. May I ask Hirose-san to give me an update on ZOZOCOSME? Sure. So it's going well. So third quarter, we have the holiday season. It's going quite well. It's had a good start for the third quarter, and then the brands are starting to understand how they can better sell on our platform, so they're doing discounts, markdowns. So it's going quite well. I see. So, ZOZOCOSME, is it growing faster than the plan? Yeah, it, it's going well. Okay, my second question is about Lyst. So you mentioned before that, adding a cart function is going to be important. How is that going? Sure, I'd like to answer that. So about the cart function, so we are working to implement that feature, and in the third quarter we've been able to implement that into some companies, so or brands. So this is something that we need to continue to work on in the next period as well. So about Lyst, you mentioned when you purchased the company, that you wanted to be in profit from next fiscal year... in the long term? So I think what I said was that it would be flat for this year and next year, so there might be a recording of a slight loss. So is it correct for me to understand that that outlook hasn't changed? Right. Got it. Thank you. That's all from me. Thank you. Thank you, Mr. Kazuhaya. Let's go to Yamaoka-san. Hello, Yamaoka from Nomura Securities here. I have three questions I'd like for you to answer. My first two questions is about SG&A. The logistic-related personnel costs, improving, and then the inventory operation improving, do you think you'll be able to sustain this momentum going into the future periods? Thank you for your question. So yes, it is continuing into the third quarter, and then I believe that we can sustain this momentum as well. I may have mentioned this before, but, in our warehouses, there is, slow-moving inventory, and, with the permission from the brands, we are engaging the operation to return such inventory so that we can optimize our inventory, and we believe that we'll be able to continue to do this. Got it. Thank you. My second question is about your shipping costs. Then in your handout, it's said that as a result of the delivery cost improvement, the financial terms have improved. Could you elaborate on this? Sure. So I won't be able to go into details, but basically, at ZOZO's logistics bases, we have implemented facility, and then Yamato has been using that. And then now, the load efficiency of the Yamato trucks has improved significantly, and then they were able to, and then we were able to improve the financial terms. So what you're saying is that your operational efficiency has improved, and then it had a positive impact on Yamato? Yes, I think that's the right image. So it was not an effort made just by us, they also collaborated. Okay, my third question is about the effect of Musinsa and how you see the future next fiscal period. Musinsa is not strong enough to have an impact on the overall GMV yet. Where should I expect positive impact of GMV will show up in? Musinsa, the impact to the overall GMV, I think you asked the same question in the second quarter. Obviously, the GMV generated with Musinsa is not big enough to have an effect on the overall GMV, but there's some Korean business customs, and we're still kind of learning our way to work with them. We'd like to continue to communicate with the Korean brands so that we can explore the best way to work with them. And then in terms of website UI, I believe that there is a lot of room for us to improve. So by working on that, we are going to work to generate more sales, more GMV with Musinsa. So what you're saying is that the third quarter. In the third quarter, this has just started, so is it correct for me to understand that I can expect a little more positive effect of Musinsa in the fourth quarter and onward? Yes. I mean, we just started the our collaboration with them in the third quarter, so we want to make it full throttle in the fourth quarter and onward. Okay, got it. Thank you. Let's go to Kanamori-san. Hello, Kanamori from Nikko. I just have one question about Lyst, if you can kindly tell me about Lyst. So during the earnings call, you said that there was industry headwinds and the changes in the U.S. tariff. What do you exactly mean by that, when you said, you know, headwinds of the industry and changes of the U.S. tariffs? I mean, if it's U.S. tariffs, do you think that that's going to continue? And we also have to ask ourselves whether that's actually legal. Anyways, earlier, you said that Lyst was not going so well. Do you think that we are in a situation where we need to start reviewing and changing our strategy for Lyst? I'd like to answer that. So the situation of high fashion merchandise, I mean, some are doing well, but actually, when it comes to the luxury industry, my understanding is that, it's not going so well, and then we are negatively impacted by that. So there are luxury EC sites that are on Lyst. They are not doing so well, and some have decided to exit from the business. And then U.S. tariff has changed when they're exporting to the U.S., and then Lyst is negatively impacted by that. So GMV is doing below the plan, and then we believe that in terms of GMV, it's going to continue to struggle. But in terms of profit, we believe that that's going to be flat. But for Lyst, the advertising promotion fee makes up for most of the promotion fees, so we can control that to control profitability or margin. So what I mean by that is that GMV is not growing as much as we hope. So what we'd like to do is to control the advertising costs so that we can, you know, have a certain level of profit. Got it. Thank you. Any other questions? Nagao-san, go ahead, please. Thank you. Thank you for giving me the second chance to ask questions. So Yamako-san asked this partially. I wanted to also ask about Musinsa. So you mentioned that it could have about 1,500 brands, but I think you had a really great vertical start. Now you have 2,015 brands, and then from the fourth quarter, you'll be able to enjoy the effect of that for the full term. So I'd like to ask you about how you plan to spend advertising expenses for that. And you also talked about exploring ways to work better with a Korean company or... So is it correct for me to understand that Musinsa continues to be positioned in your company as something that you'd like to continue to focus on? It is definitely a focal area for us, and this is one of our efforts in enhancing different categories. So the pillar of what we are doing is to strengthen different categories, and then Musinsa is one of the things that we are doing in order to enhance categories. Then for Musinsa, it doesn't mean that the more number of brands we have, the more successful, because some brands do not have traction power. So what we like to do is to work with those Korean brands, and collaborate in a better way so that we can generate more GMV. Thank you. Thank you. Next? Sato-san, go ahead. Hello, Sato from Jefferies. Thank you. I just have one single question about the number. So Korean brands, so you started out with 140 brands, and then did you say that you have 250? No, no, no. Did I hear it wrong? Yes, you heard it wrong. So we started out with 140, and then we have 2,015 brands. Oh, I'm sorry, 2,015. I understand. Then the contribution of sales, when is that going to show in a prominent way? Do you think that that can show up not in the next term, but afterwards? Because there are many things that you need to make adjustments. Well, I'd like to answer this. Sorry. So the question is, how much impact do you define as a prominent impact? If your expectation is that Musinsa does JPY 20 billion or JPY 30 billion, if that is your outlook, that, that, that's not the level that we're expecting. It is true that they have a lot of number of brands, but I wouldn't call it just a single shop, but it is an addition of one incremental category. I want to use COSME e as an example to explain this. So this is our fifth year, and then finally, in the sixth year, we've generated JPY 15 billion with this category. So that's the type of speed. So for some reason, on my app, it's not showing up. Musinsa is not showing up. Maybe because I'm older? I don't know. So I was wondering how that was like. And then, previously, you were saying that you're considering to increase the number of categories that you handle. Can you give me an update on that? So Musinsa is the first edition of a new category, and so increasing the number of categories in terms of that, so Musinsa is the very first example of marketplace model that we implemented, and now we have the right foundation in place for such business model, a marketplace model. So... And then, now we're able to have companies and brands do business without sending their inventory to our warehouse. My third question is that when you do shopping on ZOZOTOWN, you oftentimes come across like announcements, notifications, pop-ups, that said, "Well, we'll give you 10% discount if you buy apparel and cosme at the same time." Do people buy that way? Yeah, there's a lot of cross-purchases. So there are users that are willing to buy an apparel item, and then we engage in a promotion to promote cosmetics so that they can buy cosmetics with apparel. So it's not the other way around. Right, so that's what we need to strengthen for ZOZO COSME, because now apparel plays the main role, and then and cosme comes as a secondary category. So what we wanna do going forward is to create a cycle so that the users can start to come to our platform looking and wanting to buy cosmetics. Okay, so you started out with a guidance of 2%, and then you're even making upward revision. So for sales and GMV, it's a little bit lower. So is it correct for me to understand that this is something that you wanna enhance, or is it more going to be organic growth? You said 2%. Where is that? Well, your annual guidance, wasn't it 2.something%? That's only for advertising business. Oh, no, it's the advertising revenue. Oh, revenue! Oh, oh, okay. Sorry. Yes, you're right, 2%. And oh, sorry, what was your question? So, in the fourth quarter, do you want to step on the gas for advertising business? And then, in the Q&A session, when you came up with a guidance, I think someone mentioned that this was a little conservative or weak. So, I thought that. And then some thought that, you know, this is something that you could strengthen, but to reply that you said that there aren't so many places you can place an ad. So, it seems as though the number is growing more than we expected, although it's in the later part of the single digit. So is this something that we can have high expectations of? So, like, sorry, spots to place ads, I mean, we don't have so many places to put ads. I mean, because, you know, it's basically a listing ad. So the number of places, placements, places we can have those ads is limited or it's fixed. And it is true, but, you know, as you mentioned, that it is going... it's going well, it's going steadily. So far, we don't expect to see a prominent growth of our advertising business because... Then we need to find another opportunity. Otherwise, I don't think we can have a significant growth there. Okay. We're getting close to the closing time. Let's go to the last question. Moon-san, go ahead. Thank you for giving me the opportunity to ask questions. So I just wanted to ask one question. So when you divide this November... Sorry, October, November, and December, so I believe that for each particular month, there are colder days. Shimamura and other players have had weaker results. So if you separate October, November, and December, how does demand look like? And then you said that the number of SKUs came down. I'm sorry, I'm not so good in Japanese. I'm Korean, so I didn't quite understand that part. So coats, and, like, heavy garments, you carried them as your inventory, but the product mix was different. Is that what you're saying, or are you saying that some SKUs turned out to be weak? Okay, so to answer your first question, which is about the situation of October, November, and December. So November, we were on plan, and it was October and December where we undershot the plan. So in November, we had ZOZO Week, so that's a sales event, and we didn't... We had lower than expected GMV from that. And then in December, it did pick up in the latter part, but, but it wasn't enough to offset. And, you asked about the SKUs, so let me rephrase it, so in a way that it's easier to understand. So the number of styles, I guess, of outerwear turned out to be less, but the inventory volume was higher. Does that make sense? Yeah. Thank... Really? Did you...? Did that make sense? All right, thank you. All right, thank you. It is time to end the Q&A session. Thank you very much for your participation.