MARUI CO., LTD.

MARUI CO., LTD. 

Eight-Month Fiscal Period Ended September 30, 2003

FINANCIAL HIGHLIGHTS 

Marui Co., Ltd. and Its Consolidated Subsidiaries 

Eight months ended September 30, 2003, and years ended January 31, 2003 and 2002 

Thousands of United 

Millions of yen except 

States dollars except 

net income per share* 

net income per share** 

2003/9*** 2003/1 2002/1 2003/9 

Operating results: 

Operating revenues......................................................... ¥353,408 ¥558,867 ¥551,564 $3,183,856 

Merchandise sales........................................................ 273,608 443,933 443,358 2,464,937 

Interest income on consumer loans ............................ 36,558 53,500 46,324 329,351 

Operating income ........................................................... 16,009 34,317 32,929 144,225 

Ordinary income............................................................. 16,414 33,938 33,059 147,874 

Net income...................................................................... 6,154 17,620 14,910 55,441 

Net income per share (Yen and dollars):**** 

Basic............................................................................. ¥17 ¥48 ¥40 $0.15 

Diluted......................................................................... 17 45 38 0.15 

Financial position: 

Working capital .............................................................. ¥232,776 ¥263,802 ¥213,289 $2,097,082 

Stockholders’ equity........................................................ 414,456 425,641 424,400 3,733,838 

Total assets...................................................................... 734,157 729,901 743,791 6,614,027 

* All yen figures in this annual report are represented based on accounting principles generally accepted in Japan. 

** All dollar figures in this annual report refer to U.S. currency. Yen amounts have been translated, for convenience only, at the rate of ¥111 to US$1. 

*** The fiscal period ended September 30, 2003, consists of the eight months from February 1, 2003, to September 30, 2003, because of the change 

**** of the year-end. 

**** See Note 2 of the notes to consolidated financial statements. 

Note on Irregular Accounting Periods 

Marui Co., Ltd., has changed its fiscal year-end from January 31 to 

March 31. During this transitional term, the Company will use 

irregular accounting periods of eight months and six months, 

respectively. The fiscal period reviewed in this report is from 

February 1, 2003, to September 30, 2003, while the current fiscal 

period is from October 1, 2003, to March 31, 2004. Consequently, 

performance comparisons of the fiscal period under review and the 

previous fiscal year have not been included. 

Forward-Looking Statements 

This report includes certain “forward-looking statements”. These 

statements are based on management’s current expectations and are 

subject to uncertainty and changes in circumstances. Actual results 

may differ due to changes in economic, business, competitive, technological, 

regulatory and other factors. 

Cover: Kobe Marui (Opened in October 2003) 

Contents 

Corporate Profile............................................................... 1 

To Our Stockholders and Friends ..................................... 2 

Enhancing the Marui Brand ............................................. 5 

Financial Review .............................................................. 10 

Consolidated Five-Year Summary ..................................... 12 

Non-Consolidated Five-Year Summary............................. 13 

Consolidated Financial Statements ................................... 14 

Notes to Consolidated Financial Statements..................... 19 

Independent Auditors’ Report .......................................... 27 

Store Information .............................................................. 28 

Marui Group Companies................................................... 30 

Board of Directors ............................................................. 32 

Corporate Data/Investor Information............................... 33 

c2

ENHANCING THE MARUI BRAND 

Thanks to its unique combination of retail and financial 

services operations, the Marui Group has established a 

distinctive position in Japan’s retail industry. 

In retail operations, young, trend-conscious customers 

highly evaluate Marui’s extensive lineups of fashion-leading 

apparel, accessories, and interior goods. Every year, roughly 

200 million people visit our network of 29 stores concentrated 

in metropolitan Tokyo. 

Meanwhile, in financial services we enhance shopping 

convenience for 4.2 million house credit card holders by 

offering credit sales, cashing, and other services. Our house 

credit card, Akai Card, is primarily issued to facilitate purchases 

at Marui stores. The synergy achieved between financial 

services and retail operations is the main engine of the 

Group’s strong profitability. 

In the fiscal period under review, we radically reformed 

our management organization to rebuild our operating 

platform and enhance Marui’s brand power. At the same 

time, we focused on creating a highly profitable store network, 

by continuing to pursue an aggressive store opening 

strategy and to renovate existing stores. Today, the Marui 

Group is dramatically improving its ability to respond to a 

changing operating environment, by strengthening its competitiveness 

and enhancing its management efficiency. 

1

TO OUR STOCKHOLDERS AND FRIENDS 

In the eight-month fiscal period under review, ended 

September 30, 2003, the Marui Group fundamentally 

restructured its management organization to build a solid 

business platform for a new era of growth. By optimizing 

the professional expertise of each of its employees, Marui 

aims to enhance its competitiveness and distinctive position 

in Japan’s retail industry. At the same time, the 

Company is striving to increase capital efficiency and to 

build an organization that can achieve steady profitability 

even in harsh operating conditions. Marui will continue 

implementing management reforms focused on raising 

enterprise value. 

Tadao Aoi, President 

PERFORMANCE OVERVIEW 

In the fiscal period under review, the Japanese economy 

showed some signs of bottoming out, including upturns 

in stock prices and corporate performance. However, consumer 

spending remained flat due to continuing uncertainty 

with regard to employment and personal income. In 

addition, difficult operating conditions in the retail industry 

were exacerbated by highly unseasonable weather. 

Faced with this environment, the Marui Group took 

decisive measures to strengthen its business base by radically 

revamping its management organization and implementing 

highly original sales strategies. 

In these efforts, we enhanced store competitiveness and 

efficiency by remodeling existing stores and creating sales 

areas to reflect the regional character of store locations. 

In addition, the Company plans to phase out its sales of 

electric appliances due to fierce competition in a marketplace 

that is becoming increasingly crowded with general 

merchandising stores selling low-priced electric appliances. 

Meanwhile, Marui leveraged its strengths to launch 

aggressive campaigns aimed at strengthening customer 

loyalty—mainly through Akai Card tie-ins—and expanding 

sales of seasonal products. 

2

Further, we sought to heighten the expertise and efficiency 

of our administrative division by forming it into the 

wholly owned subsidiary Marui Smart Support Co., Ltd., in 

January 2003. And, aiming to improve product lineups 

and sales area operations, we made our food division into 

the wholly owned subsidiary Marui Seasoning Co., Ltd., in 

May 2003. All Marui Group companies, including the new 

subsidiaries, undertook the fundamental restructuring of 

their management organization. Focused on such areas as 

personnel systems, these efforts sought to increase each 

company’s level of professional know-how and to enhance 

the competitiveness of the Marui Group. 

Reflecting these initiatives, consolidated total operating 

revenues were ¥353.4 billion and ordinary income was 

¥16.4 billion. The Company recorded ¥28.6 billion as a 

gain on winding up of the non-contributory defined benefit 

pension plan resulting from the liquidation of the 

Marui Welfare and Pension Fund. Meanwhile, Marui also 

reported a valuation loss on fixed assets of ¥14.0 billion 

associated with the sale of head office buildings that are 

used by the parent company and its subsidiaries to consolidated 

subsidiary AIM Create Co., Ltd., which conducts 

real estate operations. In October 2003, in conjunction 

with the transfer of approximately 5,100 parent company 

employees to Group subsidiaries, with the aim of heightening 

levels of professional expertise in its respective operations, 

the Company paid special termination benefits of 

¥14.9 billion to employees that opted for voluntary retirement. 

As a result, net income totaled ¥6.2 billion. Further, 

the Company expects total assets will have contracted 

approximately ¥60 billion due to such factors as the liquidation 

of the Marui Welfare and Pension Fund, the payment 

of retirement benefits to transferees, and the 

valuation loss on head office buildings. 

By segment, merchandising sales were ¥273.7 billion, 

while operating income amounted to ¥5.4 billion. Credit 

and consumer services posted revenues of ¥43.9 billion 

and operating income of ¥8.9 billion. Revenues from outside 

customers in the other segment totaled ¥35.8 billion 

and operating income was ¥4.0 billion. The proportion of 

earnings accounted for by the merchandising segment is 

lower than in previous fiscal periods; however, this is 

because the segment’s year-end sales spike is not included 

in the eight-month fiscal period under review. Based on a 

sales projection through January 2004, the merchandising 

segment represents approximately the same proportion of 

earnings as in the previous fiscal year. 

DIVIDEND POLICY 

Our basic profit distribution policy is to bolster our operating 

platform, increase ROE, and continue stable dividend 

payments while giving overall consideration to such 

factors as performance trends and dividend payout ratios. 

Marui will work to maintain stable dividends to stockholders 

and, when possible, to increase payments over the 

long-term by using retained earnings to strengthen its 

financial position, to facilitate business development, and 

to open and renovate stores. 

Cash dividends per share applicable to the period 

under review were ¥15, for a dividend payout ratio of 

87.1%. Dividends as a proportion of stockholders’ equity 

were 1.3%. 

In the period under review, the Company received 

authorization at the annual general meeting of stockholders 

to buy back 36.00 million shares with a price cap of 

¥50.0 billion. During the period, the Company repurchased 

10.40 million shares at ¥10.5 billion, giving a total 

of 17.14 million shares repurchased at ¥17.9 billion at the 

end of the period. 

OUTLOOK AND MEDIUM-TERM MANAGEMENT 

STRATEGY 

Looking ahead, there is increasing expectation of Japan’s 

economic recovery on the back of rising stock prices and 

signs of an upturn in the U.S. economy. However, the 

outlook remains difficult to forecast in light of such causes 

for concern as currency exchange rate and interest rate 

trends. Furthermore, we expect tough business conditions 

3

to continue in the retail industry due to the long-term 

slump in consumer confidence and increasingly fierce 

competition. 

Against this backdrop, the Company will accelerate its 

store scrap-and-build program while taking steps aimed 

at moving the Marui Group into a new era of growth. 

Aiming to expand our area of commercial operations, 

we will actively open stores in promising locations. In 

October 2003, we opened our first store in the Kansai 

region—Kobe Marui, a young and sophisticated fashion 

specialty store situated in front of Sannomiya Station. 

Also, we will open our largest-ever store, Kitasenju 

Marui, in February 2004. By including other major specialty 

stores, this new store will be able to cater to the 

diverse needs of a wide range of customers. Plans also 

call for the opening of new stores in front of Nanba 

Station in Osaka in 2006 and in front of Yurakucho 

Station in Tokyo in 2007. In addition, we will enhance 

the efficiency of our network of existing stores. Such 

efforts will involve continued investment in store remodeling 

aimed at heightening the competitiveness and 

freshness of our stores. At the same time, we will close 

stores for which it has become difficult to leverage 

Marui’s distinctive strengths due to size or to changes in 

the surrounding commercial environment. In line with 

that strategy, we closed three stores and two buildings 

in January 2004, including our stores in Tsuchiura, 

Hachioji, and Kawaguchi. And, our Numazu store is slated 

for closure in May 2004. Moreover, we intend to use 

internal reserves for capital expenditures, including all 

store openings. We therefore do not plan any new 

financing in relation to these measures. 

In financial services operations, we will continue efforts 

to steadily increase the membership of our house credit 

card, the Akai Card, and to expand the branch network of 

Zero First Co., Ltd. Thanks to ongoing prudent credit 

management, consolidated outstanding loans at the end 

of the fiscal period were ¥217.2 billion. 

As part of the Marui Group’s shift to an integrated management 

organization, on October 1, 2003, approximately 

5,100 of the parent company’s employees were transferred 

to Group subsidiaries according to their abilities 

and areas of expertise. Also, we introduced a more performance 

based salary system while creating a personnel 

organization that actively promotes individuals—irrespective 

of age or experience—who are able to translate high 

levels of expertise into concrete results. 

The Marui Group will achieve solid growth by implementing 

the abovementioned measures to further develop 

its unique business model, which is founded on retail and 

financial services operations. In the current fiscal period, 

ending March 31, 2004, which is an irregular six-month 

accounting period due to a change in the Company’s fiscal 

year-end, we expect consolidated total operating revenues 

of ¥293.0 billion, ordinary income of ¥20.0 billion, 

and net income of ¥8.0 billion. Factoring in planned store 

closures and the restructuring of our personnel system, 

we anticipate ordinary income of ¥40.0 billion and ROE 

of more than 5% in the fiscal year ending March 31, 

2005—the first 12-month accounting period after the 

change in fiscal year-end. 

In closing, I would like to take this opportunity to ask 

our stockholders and friends for their continued support. 

January 2004 

Tadao Aoi, President 

4



Marui Kit Center 

Marui Seasoning 

Marui Access 

Marui M’s Mode 

Moving 

Zero First 

CSC 

AIM Create 

M&C Systems 

Marui Fashion Freak Virgin Megastores Japan 

Marui Smart Support 

Marui will accelerate its growth through stepped-up efforts to 

open new stores efficiently and to broaden its customer base 

and area of operations. In October 2003, Marui made its 

first venture into the Kansai market when it opened the Kobe 

Marui store in Kobe, Hyogo Prefecture. We plan to open 

another store in the Kansai region in 2006—at Nanba, 

Osaka. In metropolitan Tokyo, meanwhile, plans call for 

store openings at prime locations in Kitasenju in February 

2004 and in Yurakucho in 2007. 

Further, the Marui Group revamped its management organization 

on an unprecedented scale in October 2003 and 

began Group management in earnest. The main aim of such 

reforms is to have Group companies work together toward 

strengthening customer loyalty and adding value to the 

Marui brand. Through these reforms, we are not simply trying 

to cut costs; our goal is to improve competitiveness and to 

establish a dynamic organization capable of stable longterm 

growth. At the same time, Marui will improve profitability 

by withdrawing from unprofitable stores and lineups. 

By building a highly profitable store network and implementing 

farsighted reform of our management organization, 

we will create stores that even more customers love to visit. 

5

STORE STRATEGY 

CONTINUING HIGHLY EFFICIENT 

STORE OPENINGS 

Marui, which has until now developed its store network 

mainly in metropolitan Tokyo, is steadily opening stores 

in new regions with a view to creating a nationwide network. 

As the first step in these efforts, we opened Kobe 

Marui in the Kansai region in October 2003. As well as 

incorporating the chic presentation style that is Marui’s 

STORE LOCATIONS 

Kobe Marui 

Kitasenju Marui 

Nanba Store 

Yurakucho Store 

Tokyo Metropolitan Area 

Kansai Region 

trademark, we designed a highly original store by collaborating 

with local businesses and designers. Brisk sales 

have already put the store on track to outperform our 

sales forecast of ¥7.0 billion for the first year of operations 

and to achieve our target of turning a profit in the store’s 

first year. 

In addition to Kobe Marui, we will further strengthen 

our operating base in the Kansai region by opening a store 

in Osaka’s Nanba district, which is the center of Kansai’s 

political and economic life. Scheduled for opening in 

2006, the Nanba store will have a sales floor space of 

17,000 square meters—2.5 times larger than Kobe Marui. 

Meanwhile, in February 2004 we will unveil our 

largest-ever store, with 35,300 square meters of sales floor 

space, in Kitasenju. Four commuter lines meet at 

Kitasenju, making it the largest railway terminal in north 

Tokyo. Given that more than 700,000 people use the station 

a day, we are looking forward to attracting large 

numbers of customers. Plans call for a total investment 

of ¥28.5 billion. By drawing on store development knowhow 

accumulated over many years, we aim to create a 

store with extensive product lineups and services that 

NEWLY OPENED STORE 

Kobe Marui 

Date of Opening Location Sales Floor Space 

October 2003 

One of Kobe’s most popular downtown shopping areas 

6,940m 2 

NEW STORES SCHEDULED FOR OPENING 


Nanba Store 


Date of Opening Location Sales Floor Space 

February 2004 

Autumn 2006 

Spring 2007 

Adjacent to Kitasenju Station, the largest railway terminal in north Tokyo 

Center of Kansai’s political and economic life 

Adjacent to Ginza, Tokyo’s prestigious downtown shopping area 

35,300m 2 

17,000m 2 

20,000m 2 

6

cater to a wide range of customers. The store will feature 

not only fashionable apparel and accessories but also food 

products as well as restaurants and large-scale specialty 

stores. 

Moreover, the Group intends to open a store in Yurakucho 

with sales floor space of 20,000 square meters in 

2007. The Yurakucho district is adjacent to Ginza— 

Tokyo’s prestigious downtown shopping area. It is also 

close to Marunouchi, which is Japan’s largest business 

district. Investment in this store is expected to amount to 

roughly ¥30.0 billion. 

Setting our sights on metropolitan Tokyo and the Kansai 

and Chukyo regions, we will step up highly efficient store 

network expansion efforts. As internal reserves will cover 

anticipated capital expenditures of approximately ¥60.0 

billion over the coming three years, we do not plan any 

new financing. 

MANAGEMENT REFORM GOALS 

BUILDING A NEW ORGANIZATION 

FOR GROWTH 

Marui Group companies made a concerted effort to 

implement reforms aimed at creating a new management 

organization that will maintain stable growth in Japan’s 

retail industry. These reforms focused on: 

●Heightening the professional specialization of each 

Group company in its respective business field 

→to increase the Group’s collective strength, to add value 

to the Marui brand, and to get on track for new growth. 

by increasing the level of expertise that employees bring 

to every aspect of our operations. Through reform of our 

management organization, we aim to add value to the 

Marui brand and to strengthen customer loyalty. 

We expect intensified competition in Japan’s retail 

industry. Mindful of this, Marui has to implement fundamental 

reforms that enable flexible responses to changing 

customer needs and market trends while the Group is still 

strong. At the same time, we must improve competitiveness, 

profitability, and capital efficiency to ensure steady 

growth. 

STRATEGY 1 

CREATING INDEPENDENT BUSINESSES TO 

HEIGHTEN SPECIALIZATION 

As part of the reform of our management organization, we 

transferred roughly 5,100 parent company employees, 

excluding managers and executives, to Group subsidiaries 

on October 1, 2003. 

Under the new management organization, the Marui 

Group’s operations have been reorganized by function 

and entrusted to 12 Group subsidiaries. Our aim is for 

each subsidiary to enhance its specialization and competitiveness 

in its particular business area and thereby 

contribute value to the Marui brand. 

Moreover, we revamped our personnel organization by 

introducing a salary system based on position and performance. 

We have built a dynamic, results-driven regime 

that promotes employees who are able to draw on an 

Based on the fundamental retailing tenet of always 

putting the customer first, Marui has consistently won the 

endorsement of customers by offering the latest fashions. 

In recent years, however, growing homogeneity among 

rival stores has become a major problem in an increasingly 

overcrowded marketplace. It is therefore crucial for 

Marui to develop and market its own distinctive brands 

that cater precisely to market demand. Accordingly, to 

remain competitive in today’s environment, we must further 

strengthen our ability to provide customers with 

fashionable products and outstanding customer service 

7

BUSINESS LINES OF MARUI GROUP COMPANIES 

Group Company 

Marui Co., Ltd. 

Moving Co., Ltd. 

Zero First Co., Ltd. 

CSC Co., Ltd. 

AIM Create Co., Ltd. 

M&C Systems Co., Ltd. 

Virgin Megastores Japan Ltd. 

Marui Smart Support Co., Ltd. 

Marui Fashion Freak Co., Ltd. 

Marui M’s Mode Co., Ltd. 

Marui Access Co., Ltd. 

Marui Seasoning Co., Ltd. 

Marui Kit Center Co., Ltd. 

Field of Business 

Operation of Marui department stores and service operations, including cashing and credit-card-related services 

Delivery of merchandise for Marui and other companies; general transportation services 

Operation of roadside branches that provide cashing and other credit-card-related services and travel agency services 

Building security and maintenance for Marui and other companies 

Advertising, design and display of commercial facilities, and public relations for Marui and other companies 

Information processing services and sales of computer software developed for use in credit and marketing management 

Retailing of entertainment software products 

Administrative services for Marui Group companies and Marui stores 

Operation of Marui’s women’s and children’s fashion private brand shops, including ru and tasse tasse, and Marui’s women’s 

shoe, bag, and accessory shops 

Operation of Marui’s men’s fashion and sports private brand shops, including Visaruno and ON BOARD 

Operation of Marui’s watch, eyeglass, accessory, and interior goods specialty shops 

Operation of Marui’s sales floor of foodstuffs 

Sorting of certain product inventories and store supplies 

in-depth understanding of their business field to get 

results—irrespective of age or length of service. The 

models for our new Group organization were the successful 

product development and sales systems that we introduced 

in recent years to improve selling power and store 

management. In 1998, the Company launched private 

brands wholly developed by Marui. And, a sales subsidiary 

staffed by employees dispatched from the parent 

company began operations in 2000. 

In other words, we have changed our philosophy on the 

development of employees’ abilities. Rather than focusing 

on general skills, as is common among Japanese companies, 

we aim to create specialists in each operational area. 

Each Group company will independently hire new staff as 

necessary. Employees that perform well will be steadily 

elevated to positions of greater responsibility. Eventually, 

the most talented individuals will be promoted to Marui’s 

management team. 

products and services, we set basic salaries slightly above 

the average for each company’s industry. In addition, all 

Group employees receive bonus payments that reflect the 

Company’s consolidated performance. Meanwhile, we 

created a profit structure that is less susceptible to retirement 

benefit liabilities. The Company wound up its noncontributory 

defined benefit pension plan due to its 

foreseeable failure. And, the parent company settled 

retirement benefit liabilities for employees transferred to 

Group companies. Due to these organizational reforms, in 

the fiscal period under review the Company recorded 

one-time expenses associated with the payment of 

ORDINARY INCOME 

¥40 billion 

¥34 billion 

STRATEGY 2 

BUILDING A PROFIT STRUCTURE UNAFFECTED 

BY RETIREMENT BENEFIT LIABILITIES 

The reorganization of the Marui Group’s management 

has laid the foundations for a more entrepreneurial culture 

that rewards individual business success. Because 

each Marui Group company offers high-value-added 

6.1% 

7.0% 

’03/1 ’05/3 

(Estimated) 

Ordinary income ratio 

8

etirement benefits to employees transferred to Group 

companies and special termination benefits paid to 

employees opting for voluntary retirement. Overall, we 

anticipate that personnel expenses will decrease and 

profitability will improve significantly going forward as a 

result of the Group’s reorganization. However, lowering 

wages is not the main aim of these reforms. Rather, we 

are seeking to raise the quality of employees’ work and to 

facilitate growth of the Marui Group. 

Further, in order to put our reforms on track as soon as 

possible, we have launched a strategy of aggressive investment 

in television commercials and other advertising—an 

area in which, over the past decade, we have been gradually 

reducing spending. This advertising strategy aims to 

increase customer visits by reinforcing the Marui brand 

and the image of Marui stores. 

Also, we are taking steps to reduce assets in a bid to 

improve capital efficiency. For example, in conjunction 

with the shift to Group management, Marui sold head 

office buildings that are used by the parent company and 

its subsidiaries to subsidiary AIM Create Co., Ltd. As a 

result, the Company recorded a valuation loss of ¥14.0 

billion and lowered assets. We expect that those measures, 

combined with the impact of reducing the reserve 

for payment of severance and retirement benefits, will 

result in consolidated total assets contracting approximately 

¥60.0 billion. 

STRATEGY 3 

WITHDRAWING FROM UNPROFITABLE STORES 

AND LINEUPS TO BOOST EARNINGS 

As part of the reform of our management organization, we 

will actively scrap existing stores that have become 

uncompetitive. In January 2004, we closed three stores 

and two buildings, including stores in Tsuchiura, Hachioji, 

and Kawaguchi. In our view, continuing operations at 

those stores would not regain the support of customers. 

We felt that because of changes in the stores’ commercial 

districts and such considerations as fixtures and the scale 

of the stores it would have been difficult to enhance competitiveness. 

Also, 

we timed these closures 

to coincide 

with the opening of 

our large-scale store 

in Kitasenju. Given 

that scrapping lowprofit 

stores is essential 

in the creation of 

a highly profitable 

store network, we intend to continue implementing closures. 

In line with this strategy, Marui will close its 

Numazu store in May 2004. Further, we have withdrawn 

from our low-profit electric appliance retail operations 

and converted related sales areas to operations centered 

on cell phone retailing. For Marui stores in which 

we think electric appliances are needed, we have consigned 

those operations to electric appliance general 

merchandising stores. 

STORE AND BUILDING CLOSURES 

Tsuchiura Store 

Hachioji Store 

Kawaguchi Store 

in The Room Jiyugaoka 

Marui One Shibuya 

Numazu Store 

Date of Closure 

January 2004 

January 2004 

January 2004 

January 2004 

January 2004 

May 2004 

Sales Floor Space 

4,774m 2 

11,797m 2 

6,299m 2 

1,724m 2 

5,980m 2 

3,868m 2 

9

FINANCIAL REVIEW 

OPERATING RESULTS BY BUSINESS SEGMENT 

Merchandising 

In the eight-month fiscal period under review, ended 

September 30, 2003, Japan’s retail industry continued to be 

characterized by harsh business conditions. While certain 

sectors of the Japanese economy showed signs of recovery, 

as in the previous fiscal year consumer spending remained 

lackluster due to anxiety over job security and personal 

income. Also, the retail industry was adversely affected by 

an unseasonably cool summer followed by hot weather. 

In this business environment, Marui strengthened its 

competitiveness by remodeling existing stores to reflect the 

distinctive regional characteristics of each store’s location. 

Those efforts included a full remodeling of our store in 

Kokubunji, Tokyo. In addition, the Company sought to 

enhance store efficiency by significantly downsizing electric 

appliance sales areas with a view to eventual withdrawal 

from its electric appliance operations. Further, aiming to 

strengthen product lineups and the operation of food 

division sales areas, the Company established Marui 

Seasoning Co., Ltd., in May 2003. This new subsidiary is 

responsible for the management of food sales areas and 

related personnel at Marui stores. 

As a result of these initiatives, the merchandising segment 

posted operating revenues of ¥273.7 billion and operating 

income of ¥5.4 billion. 

With regard to store openings, in October 2003 we 

opened Kobe Marui—our first store in the Kansai region. 

Moreover, plans call for the opening of Marui’s largest-ever 

store, in Kitasenju in north Tokyo, in February 2004; a 

second Kansai region store in autumn 2006, in Nanba, Osaka; 

and a store in the Yurakucho district of central Tokyo in 2007. 

Sales Breakdown by Merchandise Category 

Billions of yen (% of total) 

2003/9* 2003/1 2002/1 2001/1 

Women’s apparel.................................................. ¥ 94.9 (34.7) ¥150.5 (33.9) ¥145.6 (32.8) ¥139.5 (32.1) 

Men’s apparel and sporting goods ....................... 49.3 (18.0) 87.3 (19.7) 90.9 (20.5) 90.7 (20.9) 

Luxury and accessory goods ............................... 87.1 (31.8) 141.3 (31.8) 147.9 (33.4) 144.3 (33.2) 

Furniture and household appliances................... 15.1 (5.5) 24.7 (5.5) 26.0 (5.9) 28.6 (6.6) 

Foodstuffs and restaurant sales ........................... 27.2 (10.0) 40.2 (9.1) 33.0 (7.4) 31.2 (7.2) 

Total ................................................................. ¥273.6 (100.0) ¥444.0 (100.0) ¥443.4 (100.0) ¥434.3 (100.0) 

* Eight months ended September 30, 2003. 

Credit and Consumer Services 

In credit and consumer services operations, Marui steadily 

expanded its network of Zero First branches and grew Akai 

Card membership. Thanks to a consistently prudent credit 

management policy, we maintained a sound default rate of 

2.1% in our mainstay consumer loan business despite the 

deterioration of conditions in the consumer loan market in 

recent years. Outstanding loans at the end of the fiscal 

period rose 3.1% from January 31, 2003, to ¥217.2 billion, 

while interest income on consumer loans for the period 

totaled ¥36.6 billion. As a result, credit and consumer 

services operating revenues were ¥43.9 billion and operating 

income was ¥8.9 billion. 

Other 

The other segment—mainly comprising the operations of 

subsidiaries—recorded operating revenues from outside 

customers of ¥35.8 billion and operating income of ¥4.0 

billion. 

Total Operating Revenues 

Sales Breakdown by Merchandise Category 

Composition of Customer Base 

by Age and Gender 

(Billion ¥) 

600 

500 

400 

300 

200 

100 

0 

’00/1 ’01/1 ’02/1 ’03/1’03/9* ’05/3** 

(Estimated) 

572 

(%) 

5.5 

31.8 

10.0 

34.7 

18.0 

Women’s Apparel 

Men’s Apparel and 

Sporting Goods 

Luxury and Accessory 

Goods 

Furniture and Household 

Appliances 

Foodstuffs and Restaurant 

Sales 

(%) 

6.9 6.2 

15.3 

20.4 

79.6 

71.6 

Women 

Men 

10s~20s 

30s 

40s 

50s 

* Eight months ended September 30, 2003 

** Full year ending March 31, 2005 

10

CONSOLIDATED OPERATIONS 

In the fiscal period under review, total operating revenues 

amounted to ¥353.4 billion. Cost of goods sold of ¥227.0 

billion and gross profit of ¥126.4 billion gave a gross profit 

ratio of 35.8%. Selling, general and administrative (SGA) 

expenses totaled ¥110.4 billion. And, SGA expenses as a 

ratio of operating revenues were 31.2%. Consequently, the 

Company posted operating income of ¥16.0 billion and 

ordinary income of ¥16.4 billion. 

In special gains (losses), loss on devaluation of fixed 

assets of ¥14.0 billion and special termination benefits paid 

to employees of ¥14.9 billion offset a ¥28.6 billion gain on 

winding up of the non-contributory defined benefit pension 

plan, associated with the liquidation of the Marui Welfare 

and Pension Fund. As a result, total special losses were ¥3.3 

billion. 

Marui therefore recorded income before income taxes and 

minority interests of ¥13.2 billion and net income of ¥6.2 

billion. Diluted net income per share was ¥17. Return on 

total assets was 0.8%, while return on stockholders’ equity 

was 1.5%. 

CASH FLOW AND FINANCIAL CONDITION 

The Company generates adequate cash flow to fund timely 

strategic capital investment for growth. Also, Marui 

maintains and strengthens the soundness of its financial 

position by taking steps to reduce total assets. Thanks to 

such measures in the fiscal period under review, we were 

able to maintain our solid financial position. 

In cash flows from operating activities, income before 

income taxes and minority interests of ¥13.2 billion, 

depreciation and amortization of ¥12.2 billion, and income 

taxes paid in cash of ¥10.6 billion contributed to net cash 

provided by operating activities of ¥15.9 billion. 

In cash flows from investing activities, net cash used in 

investing activities totaled ¥5.3 billion, which was mainly 

related to payments for purchase of property and equipment 

for the opening of new stores and the remodeling of 

existing stores. 

DIVIDENDS 

Cash dividends per share were ¥15, giving a dividend 

payout ratio of 87.1%. Dividends as a proportion of 

stockholders’ equity were 1.3%. In addition, the Company 

In cash flows from financing activities, payments for 

purchase of treasury stock of ¥10.5 billion largely offset an 

¥11.7 billion net increase in short-term loans and long-term 

debt. Consequently, net cash used in financing activities was 

¥6.8 billion. 

As a result, cash and cash equivalents at the end of the 

fiscal period increased ¥3.8 billion from the previous fiscal 

year-end, to ¥68.6 billion. 

At the end of the fiscal period, total current assets stood at 

¥413.6 billion and total current liabilities amounted to 

¥180.9 billion. Working capital was ¥232.8 billion and the 

current ratio was 2.3 times. Meanwhile, total assets were 

¥734.2 billion, total stockholders’ equity was ¥414.5 billion, 

and the equity ratio was 56.5%. 

paid ¥10.5 billion for the purchase of treasury stock in the 

fiscal period under review. 

Operating Income 

Net Income 

Total Assets and Stockholders’ Equity 

(Billion ¥) 

50 

(Billion ¥) 

20 

20 

(%) 

5 

(Billion ¥) 

800 

(%) 

100 

40 

41 

15 

4 

600 

80 

30 

20 

10 

3 

2 

400 

60 

40 

10 

5 

1 

200 

20 

0 

’00/1 ’01/1 ’02/1 ’03/1’03/9* ’05/3** 

(Estimated) 



0 

0 

’00/1 ’01/1 ’02/1 ’03/1’03/9* ’05/3** 

(Estimated) 

Return on Total Assets (right scale) Return on Equity (right scale) 



0 

’00/1 ’01/1 ’02/1 ’03/1 ’03/9* 

Stockholders’ Equity Equity Ratio (right scale) 


0 

11

CONSOLIDATED FIVE-YEAR SUMMARY 


Eight months ended September 30, 2003, and years ended January 31, 2003, 2002, 2001 and 2000 




per share amounts and other information* 

per share amounts** 

2003/9*** 2003/1 2002/1 2001/1 2000/1 2003/9 


Total operating revenues ......................... ¥353,408 ¥558,867 ¥551,564 ¥530,485 ¥521,802 $3,183,856 

Merchandise sales ................................ 273,608 443,933 443,358 434,206 432,579 2,464,937 

Finance charges earned 

on installment sales ........................... 1,417 2,348 2,509 2,537 2,679 12,766 

Interest income on 

consumer loans.................................. 36,558 53,500 46,324 37,591 36,950 329,351 

Other revenues..................................... 41,825 59,086 59,373 56,151 49,594 376,802 

Cost of goods sold................................... 226,966 356,558 353,252 341,763 330,195 2,044,739 

Selling, general and 

administrative expenses ........................ 110,433 167,992 165,383 159,580 159,060 994,892 

Operating income.................................... 16,009 34,317 32,929 29,142 32,547 144,225 

Ordinary income ..................................... 16,414 33,938 33,059 29,381 33,092 147,874 

Net income.............................................. 6,154 17,620 14,910 8,335 17,354 55,441 

Per share amounts (Yen and dollars): 

Net income**** – Basic....................... ¥17 ¥48 ¥40 ¥23 ¥47 $0.15 

– Diluted................... 17 45 38 22 44 0.15 

Cash dividends .................................... 15 22 22 22 22 0.14 

Financial position at period-end and year-end: 

Working capital....................................... ¥232,776 ¥263,802 ¥213,289 ¥227,038 ¥217,206 $2,097,082 

Receivables .............................................. 247,327 247,924 239,862 194,855 186,910 2,228,171 

Stockholders’ equity ................................ 414,456 425,641 424,400 417,396 417,890 3,733,838 

Total assets .............................................. 734,157 729,901 743,791 675,239 661,063 6,614,027 

Long-term debt, less current maturities... 129,689 129,689 82,889 99,562 99,562 1,168,369 

Other information: 

Average number of shares 

outstanding (thousands)....................... 353,810 367,512 368,656 368,658 368,657 

Sales floor space (m 2 ) .............................. 488,875 488,875 475,245 456,219 447,275 

Number of employees ............................. 9,181 10,379 9,957 10,171 10,164 




of the year-end. 


12

NON-CONSOLIDATED FIVE-YEAR SUMMARY 


Eight months ended September 30, 2003, and years ended January 31, 2003, 2002, 2001 and 2000 




per share amounts and other information* 

per share amounts** 

2003/9*** 2003/1 2002/1 2001/1 2000/1 2003/9 


Total operating revenues ......................... ¥313,830 ¥504,329 ¥498,507 ¥482,090 ¥480,882 $2,827,297 

Merchandise sales ................................ 273,598 443,840 443,156 433,904 432,579 2,464,847 

Finance charges earned 

on installment sales ........................... 1,417 2,348 2,509 2,537 2,679 12,765 

Interest income on 

consumer loans.................................. 32,292 48,529 42,969 35,348 35,291 290,919 

Other revenues..................................... 6,523 9,612 9,873 10,301 10,333 58,766 

Cost of goods sold................................... 196,310 315,970 313,342 306,623 299,901 1,768,558 

Selling, general and 

administrative expenses ........................ 103,414 157,297 156,801 150,623 152,965 931,658 

Operating income.................................... 14,106 31,062 28,364 24,844 28,016 127,081 

Ordinary income ..................................... 14,703 30,940 28,750 25,254 28,682 132,459 

Net income.............................................. 4,944 16,255 12,815 9,360 15,516 44,541 

Per share amounts (Yen and dollars): 

Net income**** – Basic....................... ¥14 ¥44 ¥35 ¥25 ¥42 $0.13 

– Diluted................... 14 42 33 25 40 0.13 

Cash dividends .................................... 15 22 22 22 22 0.14 

Financial position at period-end and year-end: 

Working capital....................................... ¥215,182 ¥229,544 ¥188,545 ¥206,762 ¥195,977 $1,938,577 

Receivables .............................................. 214,261 221,310 219,781 180,514 175,628 1,930,279 

Stockholders’ equity ................................ 376,108 388,522 388,640 383,754 382,588 3,388,360 

Total assets .............................................. 645,147 652,919 675,465 614,322 609,277 5,812,135 

Long-term debt, less current maturities.. 119,839 119,839 79,839 99,562 99,562 1,079,631 

Other information: 

Average number of shares 

outstanding (thousands)....................... 353,810 367,512 368,656 368,658 368,657 

Sales floor space (m 2 ) .............................. 488,875 488,875 475,245 456,219 447,275 

Number of employees ............................. 1,477 2,335 2,458 4,904 7,050 




of the year-end. 


13

CONSOLIDATED BALANCE SHEETS 


September 30 and January 31, 2003 

Thousands of 

U.S. dollars 

Millions of yen (Note 3) 

ASSETS 2003/9 2003/1 2003/9 

Current assets: 

Cash (Note 4)................................................................................................. ¥ 68,616 ¥ 64,754 $ 618,162 

Receivables: 

– Merchandise sales........................................................................................ 39,013 45,054 351,468 

– Consumer loans .......................................................................................... 217,214 210,670 1,956,883 

– Allowance for doubtful accounts ................................................................ (8,900) (7,800) (80,180) 

247,327 247,924 2,228,171 

Securities (Note 6) ......................................................................................... 10,000 – 90,090 

Inventories (Note 5)....................................................................................... 52,041 51,566 468,838 

Deferred income tax assets (Note 11)............................................................ 9,490 3,150 85,496 

Other current assets ....................................................................................... 26,172 13,435 235,784 

Total current assets.................................................................................. 413,646 380,829 3,726,541 

Property and equipment, at cost: 

Land ............................................................................................................... 94,213 107,784 848,766 

Buildings and improvements ......................................................................... 263,737 267,662 2,376,009 

Store fixtures and equipment......................................................................... 39,832 39,707 358,847 

Construction in progress................................................................................ 8,768 6,564 78,991 

406,550 421,717 3,662,613 

Less accumulated depreciation ...................................................................... (190,630) (192,586) (1,717,388) 

Net property and equipment................................................................... 215,920 229,131 1,945,225 

Other assets: 

Investments in securities (Note 6)................................................................. 11,434 19,474 103,009 

Prepaid rents and lease deposits – principally for stores (Note 7)................. 64,096 72,673 577,441 

Deferred income tax assets (Note 11)............................................................ 5,800 17,530 52,252 

Other assets.................................................................................................... 23,261 10,264 209,559 

Total other assets..................................................................................... 104,591 119,941 942,261 

¥ 734,157 ¥ 729,901 $ 6,614,027 

See accompanying notes to consolidated financial statements. 

14

Thousands of 

U.S. dollars 


LIABILITIES AND STOCKHOLDERS’ EQUITY 2003/9 2003/1 2003/9 

Current liabilities: 

Short-term loans and current maturities of long-term debt (Note 8)............ ¥ 57,790 ¥ 46,100 $ 520,631 

Payables – principally trade ........................................................................... 48,907 41,981 440,603 

Income taxes payable ..................................................................................... 695 9,610 6,261 

Other current liabilities.................................................................................. 73,478 19,336 661,964 

Total current liabilities ............................................................................ 180,870 117,027 1,629,459 

Long-term liabilities: 

Long-term debt, less current maturities (Note 8).......................................... 129,689 129,689 1,168,369 

Deferred income tax liabilities (Note 11) ...................................................... 1,900 1,600 17,117 

Severance and retirement benefits for employees (Note 10) ......................... 1,300 50,391 11,712 

Severance and retirement benefits for directors and 

corporate statutory auditors......................................................................... 1,318 1,350 11,874 

Other long-term liabilities.............................................................................. 2,195 2,223 19,775 

Total long-term liabilities ........................................................................ 136,402 185,253 1,228,847 

Minority interests ............................................................................................. 2,429 1,980 21,883 

Contingent liabilities (Note 12) 

Stockholders’ equity: 

Common stock: 

Authorized – 1,400,000 thousand shares 

Issued – 368,660 thousand shares.............................................................. 35,921 35,921 323,613 

Capital surplus ............................................................................................... 91,274 91,274 822,288 

Retained earnings........................................................................................... 304,444 306,339 2,742,739 

431,639 433,534 3,888,640 

Net unrealized holding gains (losses) on securities....................................... 689 (532) 6,207 

Less treasury stock, at cost............................................................................. (17,872) (7,361) (161,009) 

Total stockholders’ equity ....................................................................... 414,456 425,641 3,733,838 

¥734,157 ¥729,901 $6,614,027 

15

CONSOLIDATED STATEMENTS OF INCOME 



Thousands of 

U.S. dollars 


2003/9 2003/1 2002/1 2003/9 

Operating revenues: 

Merchandise sales............................................................................ ¥273,608 ¥443,933 ¥443,358 $2,464,937 

Finance charges earned on installment sales .................................. 1,417 2,348 2,509 12,766 

Interest income on consumer loans ................................................ 36,558 53,500 46,324 329,351 

Other revenues................................................................................ 41,825 59,086 59,373 376,802 

Total operating revenues .......................................................... 353,408 558,867 551,564 3,183,856 

Operating expenses: 

Cost of goods sold........................................................................... 226,966 356,558 353,252 2,044,739 

Selling, general and administrative expenses.................................. 110,433 167,992 165,383 994,892 

Total operating expenses .......................................................... 337,399 524,550 518,635 3,039,631 

Operating income .............................................................................. 16,009 34,317 32,929 144,225 

Non-operating income (expenses): 

Interest income ............................................................................... 300 416 436 2,703 

Interest expenses............................................................................. (1,221) (2,533) (1,900) (11,000) 

Other, net ........................................................................................ 1,326 1,738 1,594 11,946 

Total non-operating income (expenses)................................... 405 (379) 130 3,649 

Ordinary income................................................................................ 16,414 33,938 33,059 147,874 

Special gains (losses): 

Gain on sale of property and equipment......................................... 623 15 3,568 5,613 

Gain on sale of investments in securities........................................ – – 17 – 

Gain on winding up of the non-contributory defined 

benefit pension plan (Notes 2 and 10) ......................................... 28,564 – – 257,333 

Loss on disposal of property and equipment .................................. (2,038) (2,682) (3,240) (18,361) 

Loss on sale of investments in securities ........................................ – (48) (399) – 

Loss on devaluation of property and equipment ............................ (14,024) – – (126,342) 

Loss on devaluation of investments in securities............................ (40) (145) (984) (360) 

Loss on devaluation of investment in an affiliated company.......... – (100) – – 

Loss on devaluation of golf memberships....................................... – – (26) – 

Loss on the net transition obligation of severance and 

retirement benefits for employees (Note 2) .................................. – – (5,395) – 

Loss on partial termination of lump-sum severance and 

retirement benefits for employees and privately held 

pension plan (Notes 2 and 10) ..................................................... (396) – – (3,568) 

Special termination benefits paid to employees (Note 10) ............. (14,901) – – (134,243) 

Other, net ........................................................................................ (1,038) – – (9,351) 

Total special losses ................................................................... (3,250) (2,960) (6,459) (29,279) 

Income before income taxes and minority interests ........................ 13,164 30,978 26,600 118,595 

Income taxes (Note 11): 

Current............................................................................................ 1,720 17,143 16,133 15,495 

Deferred........................................................................................... 4,833 (3,915) (4,610) 43,541 

Total income taxes.................................................................... 6,553 13,228 11,523 59,036 

Minority interests .............................................................................. (457) (130) (167) (4,118) 

Net income......................................................................................... ¥ 6,154 ¥ 17,620 ¥ 14,910 $ 55,441 

U.S. dollars 

Yen (Note 3) 

Net income per share: 

Basic ................................................................................................ ¥17 ¥48 ¥40 $0.15 

Diluted ............................................................................................ 17 45 38 0.15 

Cash dividends per share applicable to the year ............................. 15 22 22 0.14 


16

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY 



Millions of yen 

Thousands of 

Net unrealized 

shares of Common Capital Retained holding gains Less treasury 

common stock stock surplus earnings (losses)on securities stock, at cost 

Balance at January 31, 2001 .................................... 368,660 ¥35,921 ¥91,274 ¥290,202 ¥ – ¥ (1) 

Net income ............................................................ – – – 14,910 – – 

Cash dividends paid (¥22 per share)..................... – – – (8,111) – – 

Directors’ bonuses.................................................. – – – (86) – – 

Net unrealized holding gains on securities............ – – – – 315 – 

Treasury stock acquired, net.................................. – – – – – (24) 

Balance at January 31, 2002 .................................... 368,660 35,921 91,274 296,915 315 (25) 

Net income ............................................................ – – – 17,620 – – 



Net unrealized holding losses on securities........... – – – – (847) – 

Treasury stock acquired, net.................................. – – – – – (7,336) 

Balance at January 31, 2003 .................................... 368,660 35,921 91,274 306,339 (532) (7,361) 

Net income ............................................................ – – – 6,154 – – 



Net unrealized holding gains on securities............ – – – – 1,221 – 


Balance at September 30, 2003................................ 368,660 ¥35,921 ¥91,274 ¥304,444 ¥ 689 ¥(17,872) 

Thousands of U.S. dollars (Note 3) 

Thousands of 

Net unrealized 

shares of Common Capital Retained holding gains Less treasury 

common stock stock surplus earnings (losses)on securities stock, at cost 

Balance at January 31, 2003 .................................... 368,660 $323,613 $822,288 $2,759,812 $ (4,793) $ (66,315) 

Net income ............................................................ – – – 55,441 – – 

Cash dividends paid ($0.14 per share).................. – – – (71,739) – – 


Net unrealized holding gains on securities............ – – – – 11,000 – 


Balance at September 30, 2003................................ 368,660 $323,613 $822,288 $2,742,739 $ 6,207 $(161,009) 


17

CONSOLIDATED STATEMENTS OF CASH FLOWS 



Thousands of 

U.S. dollars 


2003/9 2003/1 2002/1 2003/9 

Cash flows from operating activities: 

Income before income taxes and minority interests ....................... ¥ 13,164 ¥ 30,978 ¥ 26,600 $ 118,595 

Adjustments to reconcile income before income taxes and minority 

interests to net cash provided by (used in) operating activities: 

Depreciation and amortization .................................................... 12,242 18,780 18,038 110,288 

Increase (decrease) in accrued bonuses....................................... 4,270 10 (283) 38,469 

(Decrease) increase in severance and retirement benefits 

for employees and prepaid pension expense ............................. (33,343) 4,898 7,189 (300,387) 

Interest and dividends income .................................................... (389) (533) (548) (3,505) 

Interest expenses ......................................................................... 1,221 2,533 1,900 11,000 

Issuance costs of bonds ............................................................... – 240 212 – 

Gain on sale of property and equipment ..................................... (623) (15) (3,568) (5,613) 

Gain on sale of investments in securities .................................... – – (17) – 

Gain on winding up of the non-contributory defined 

benefit pension plan .................................................................. (28,564) – – (257,333) 

Loss on disposal of property and equipment............................... 1,463 2,173 2,937 13,180 

Loss on sale of investments in securities..................................... – 48 399 – 

Loss on devaluation of investments in securities ........................ 40 145 984 360 

Loss on devaluation of property and equipment......................... 14,024 – – 126,342 

Loss on devaluation of investment in an affiliated company ...... – 100 – – 

Loss on devaluation of golf memberships ................................... – – 26 – 

Decrease (increase) in receivables, less allowance for 

doubtful accounts...................................................................... 596 (8,062) (45,007) 5,369 

(Increase) decrease in inventories ............................................... (474) 2,590 (2,833) (4,270) 

Increase in tax refund receivable ................................................. (7,220) – – (65,045) 

Increase (decrease) in payables – principally trade ..................... 6,926 (2,686) (2,277) 62,397 

Increase in payables of lump-sum severance payments and 

special severance indemnities.................................................... 49,862 – – 449,207 

Bonuses paid to directors............................................................. (86) (86) (86) (775) 

Other, net..................................................................................... (6,299) (3,150) 528 (56,748) 

Subtotal .................................................................................... 26,810 47,963 4,194 241,531 

Interest and dividends income received in cash.......................... 413 523 572 3,721 

Interest expenses paid in cash ..................................................... (711) (2,413) (1,801) (6,405) 

Income taxes paid in cash............................................................ (10,634) (17,649) (12,103) (95,802) 

Net cash provided by (used in) operating activities ................ 15,878 28,424 (9,138) 143,045 

Cash flows from investing activities: 

Payments for purchase of property and equipment ........................ (11,493) (22,797) (29,754) (103,540) 

Proceeds from sale of property and equipment............................... 1,070 181 4,988 9,640 

Purchases of investments in securities............................................ (22) (156) (34) (198) 

Proceeds from sale of investments in securities.............................. – 147 191 – 

Payments of leasehold deposits....................................................... (187) (2,169) (3,603) (1,685) 

Refunds of leasehold deposits ......................................................... 5,482 3,302 4,636 49,387 

Other, net ........................................................................................ (173) 32 (1,402) (1,559) 

Net cash used in investing activities ........................................ (5,323) (21,460) (24,978) (47,955) 

Cash flows from financing activities: 

Net increase in short-term loans and long-term debt ..................... 11,690 5,450 6,810 105,316 

Proceeds from issuance of bonds .................................................... – 39,760 39,788 – 

Redemption of convertible bonds ................................................... – (59,962) – – 

Payments for purchase of treasury stock ........................................ (10,510) (7,348) – (94,685) 

Dividends paid ................................................................................ (7,963) (8,110) (8,111) (71,739) 

Other, net ........................................................................................ (10) (11) (34) (90) 

Net cash (used in) provided by financing activities................. (6,793) (30,221) 38,453 (61,198) 

Net increase (decrease) in cash and cash equivalents ..................... 3,762 (23,257) 4,337 33,892 

Cash and cash equivalents at beginning of year............................... 64,754 88,011 83,574 583,369 

Increase in cash and cash equivalents due to inclusion of 

additional subsidiaries in the consolidation .................................. 100 – 100 901 

Cash and cash equivalents at end of year......................................... ¥ 68,616 ¥ 64,754 ¥ 88,011 $ 618,162 


18

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 


September 30, 2003 and January 31, 2003 and 2002 

1. BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS 

Marui Co., Ltd. (the “Company”) and its consolidated subsidiaries 

(the “Companies”) maintain their accounts and records in 

accordance with the provisions set forth in the Japanese Commercial 

Code (the “Code”) and the Securities and Exchange Law and in 

conformity with accounting principles and practices generally 

accepted in Japan, which are different from International Accounting 

Standards and standards in other countries in certain respects as to 

application and disclosure requirements. Accordingly, the accompanying 

financial statements are intended for use by those who are 

informed about Japanese accounting principles and practices. 

The accompanying consolidated financial statements are a translation 

of the audited consolidated financial statements of the Company 

which were prepared in accordance with accounting principles and 

practices generally accepted in Japan from the accounts and records 

maintained by the Company and its consolidated subsidiaries and 

were filed with the appropriate Local Finance Bureau of the Ministry 

of Finance as required by the Securities and Exchange Law. 

In preparing the accompanying consolidated financial statements, 

certain reclassifications and modifications have been made 

in the consolidated financial statements issued domestically in 

order to present them in a form which is more familiar to readers 

outside Japan. The consolidated statements of stockholders’ equity 

for the eight months ended September 30, 2003, and for the years 

ended January 31, 2003 and 2002, have been prepared for the 

purpose of inclusion in the consolidated financial statements, 

although such statements were not customarily prepared in Japan 

and not filed with the regulatory authorities. 

The Company and its consolidated subsidiaries changed the 

year-end from January 31 to March 31 in accordance with the resolution 

of change in a part of the Company’s articles at the annual 

general meeting of the stockholders held on April 25, 2003. As the 

transitional period of the change of the fiscal year-end, the most 

recent fiscal period ended September 30, 2003, which consists of 

the eight months from February 1, 2003 to September 30, 2003. 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 

(a) PRINCIPLES OF CONSOLIDATION 

The consolidated financial statements include the accounts of the 

Company and its significant subsidiaries, which are all Japanese 

corporations. All companies in Japan are required to consolidate 

all significant investees which are controlled through substantial 

ownership of majority voting rights or through certain other 

means. The application of this rule to the Company’s consolidated 

financial statements had no effect. All significant intercompany 

transactions and unrealized profits among the Companies have 

been eliminated in consolidation. Investments in 20%–50% 

owned affiliates are carried at cost, since the amounts are insignificant. 

In the elimination of investments in subsidiaries, the assets 

and liabilities of the subsidiaries, including the portion attributable 

to minority stockholders, are evaluated using the fair value at the 

time the Company acquired control of the respective subsidiaries. 

The excess of investment cost over the net assets of a subsidiary 

acquired is amortized on a straight-line basis over a period of five 

years. However, the excess is charged (or credited) to income in 

the period of acquisition when the amounts are immaterial. 

(b) CASH AND CASH EQUIVALENTS 

In preparing the consolidated statements of cash flows, cash, 

readily-available deposits and short-term highly liquid investments 

with maturities of not exceeding three months at the time 

of purchase are considered to be cash and cash equivalents. 

(c) UNEARNED FINANCE CHARGES 

At the balance sheet date, unearned finance charges included in 

receivables of merchandise sales under installment sales and 

consumer loans are deferred. 

(d) INVESTMENTS IN SECURITIES 

Effective February 1, 2001, the Companies have adopted the 

“Accounting Standard for Financial Instruments”, issued by the 

Business Accounting Deliberation Council on January 22, 1999. 

Upon applying this accounting standard, all companies are 

required to examine the intent of holding each security and 

classify those securities as (a) securities held for trading purposes, 

(b) debt securities intended to be held to maturity (hereafter, 

“held-to-maturity debt securities”), (c) equity securities issued by 

subsidiaries and affiliated companies and (d) all other securities 

that are not classified in any of the above categories (hereafter, 

“available-for-sale securities”). 

Based on the examination of the intent of holding, the 

Companies classified their securities as held-to-maturity debt 

securities, equity securities issued by subsidiaries and affiliated 

companies and available-for-sale securities. Held-to-maturity debt 

securities maturing within one year from the balance sheet date 

are included in current assets. Other securities are included in 

investments in securities. 

Held-to-maturity debt securities are stated at amortized cost. 

Equity securities issued by subsidiaries and affiliated companies 

that are not consolidated or accounted for using the equity 

method are stated at cost by the moving average method. Availablefor-sale 

securities with available fair market values are stated at the 

market value. Unrealized gains and losses on these securities are 

reported, net of applicable income taxes, as a separate component 

of stockholders’ equity. Realized gains and losses on sale of such 

securities are computed by the moving average method. Availablefor-sale 

securities without available fair market value are stated at 

cost by the moving average method. 

(e) ALLOWANCE FOR DOUBTFUL ACCOUNTS 

Effective February 1, 2001, the Companies have adopted the 

“Opinion Concerning Establishment of Accounting Standard for 

Financial Instruments”, issued by the Business Accounting 

Deliberation Council on January 22, 1999. 

Under this accounting standard, the Companies provide for a 

sufficient allowance for doubtful accounts to cover probable losses 

on collection by estimating uncollectible amounts individually in 

addition to amounts for possible losses based on actual losses on 

collection in the past. 

(f) MERCHANDISE INVENTORIES 

Merchandise inventories are principally determined on the retail 

inventory method and are stated at cost, which is lower than 

market. 

(g) PROPERTY AND EQUIPMENT AND DEPRECIATION 

Property and equipment are carried at cost. Depreciation is 

computed over the estimated useful lives of the assets on a 

declining-balance method. Estimated useful lives of the assets are 

as follows: 

Number of years 

Buildings.................................................................. 39–50 

Improvements.......................................................... 3–15 

Store fixtures and equipment .................................. 3–10 

(h) INTANGIBLE ASSETS AND AMORTIZATION 

The Companies amortize intangible assets (except for software to 

be sold) based on the straight-line method in accordance with the 

Japanese Corporate Tax Law. The annual amortization of software 

to be sold is provided by the greater of the amount computed 

using the expected sales revenues or the amount computed using 

the straight-line method over the expected marketable period 

(within three years). 

(i) SEVERANCE AND RETIREMENT BENEFITS FOR 

EMPLOYEES 

Employees severing their connection with the Companies on retirement 

are generally entitled to annuity payments covered by three 

19

severance and retirement benefit pension plans—a non-contributory 

defined benefit pension plan supported by the government, a 

lump-sum severance and retirement payment plan and a privately 

held pension plan—based on rates of pay, length of service and 

certain other factors. 

Effective February 1, 2001, the Companies adopted the new 

accounting standard, “Opinion on Setting Accounting Standard 

for Employees’ Severance and Pension Benefits”, issued by the 

Business Accounting Deliberation Council on June 16, 1998. 

The excess of the present value of the future obligations 

required for severance and retirement benefit plans over the 

total of the fair value of the pension plan assets as of February 1, 

2001, and the obligations for severance and retirement benefits 

recorded as of February 1, 2001 (the “net transition obligation”), 

amounted to ¥5,395 million and was expensed and presented as 

a special loss in the year ended January 31, 2002. 

Actuarial gains and losses are amortized using the straightline 

method over the estimated average remaining service lives 

(from ten years to fourteen years) of employees commencing 

with the following period. 

As a result of the adoption of the new accounting standard, in 

the year ended January 31, 2002, income before income taxes 

decreased by ¥5,395 million compared with what would have 

been recorded under the previous accounting standard. 

In connection with enforcement of the Defined Benefit Enterprise 

Pension Law, the Company and some of its consolidated subsidiaries 

received approval from the Minister of Health, Labor and 

Welfare for winding up the non-contributory defined benefit pension 

plan supported by the government and exemption from payment 

of future benefits on March 18 and September 26, 2003. 

Under this condition, the Company and some of its 

consolidated subsidiaries adopted the Accounting Standard 

Implementation Guidance No. 1, “Implementation Guidance on 

Accounting Standard for the Transitions Between the Retirement 

Benefit Plans”, issued by the Accounting Standards Board 

of Japan. In accordance with the standard, the Company and 

some of its consolidated subsidiaries recorded a gain which was 

the difference between the present value of the future obligations 

for retirement benefit plans and the pension plan assets, which 

were related to the dissolution, and unamortized actuarial losses 

corresponding to the dissolved portion of present value of the 

future obligations charged to income. 

As a result of adopting the accounting standard, gain on 

winding up of the non-contributory defined benefit pension plan 

amounted to ¥28,564 million ($257,333 thousand) and it was recognized 

as special gains for the fiscal period ended September 30, 

2003. 

As a part of management reforms, many of the Company’s 

employees transferred to the Company’s subsidiaries in accordance 

with the transition toward the new personnel system on 

September 30, 2003. 

Also, the Company’s consolidated subsidiaries demolished 

their privately held pension plan and lump-sum severance and 

retirement payment plan on September 30, 2003. As a result, the 

Company and its consolidated subsidiaries reversed the severance 

and retirement benefits for employees amounted to ¥34,814 

million ($313,640 thousand) for the payment of lump-sum 

severance and retirement payment, and also recognized loss on 

partial termination of privately held pension plan and loss on partial 

termination of lump-sum severance and retirement payment 

plan as part of special losses amounted to ¥396 million ($3,568 

thousand), on September 30, 2003 in accordance with the Accounting 

Standard Implementation Guidance No. 1, “Implementation 

Guidance on Accounting Standard for the Transitions Between 

the Retirement Benefit Plans”, issued by the Accounting Standards 

Board of Japan. 

(j) SEVERANCE AND RETIREMENT BENEFITS FOR 

DIRECTORS AND CORPORATE STATUTORY AUDITORS 

For directors and corporate statutory auditors, the Companies 

offer a lump-sum retirement benefit plan. The Companies accrue 

100% of amounts calculated based on the Companies’ retirement 

rules under the assumption that all directors and corporate 

statutory auditors retired from the Companies on the balance 

sheet date in order to prepare future payments of retirement 

benefits. Retirement benefits to be paid to directors and corporate 

statutory auditors are subject to an approval of the general meeting 

of stockholders before the retirement benefits are paid in accordance 

with the Code. 

(k) APPROPRIATION OF RETAINED EARNINGS 

Cash dividends and bonuses to directors and corporate statutory 

auditors are recorded in the fiscal period or year when the 

proposed appropriation of retained earnings is approved at the 

general meeting of stockholders. 

(l) STOCKHOLDERS’ EQUITY 

Under the Commercial Code of Japan, the entire amount of the 

issue price of shares is required to be accounted for as capital, 

although a company may, by resolution of its Board of Directors, 

account for an amount not exceeding one-half of the issue price of 

the new shares as additional paid-in capital, which is included in 

capital surplus. 

Effective October 1, 2001, the Commercial Code provides that 

an amount equal to at least 10% of cash dividends and other cash 

appropriations shall be appropriated and set aside as a legal 

earnings reserve until the total amount of legal earnings reserve 

and additional paid-in capital equals 25% of common stock. The 

legal earnings reserve and additional paid-in capital may be used 

to eliminate or reduce a deficit by resolution of the stockholders’ 

meeting or may be capitalized by resolution of the Board of 

Directors. On condition that the total amount of legal earnings 

reserve and additional paid-in capital remains being equal to or 

exceeding 25% of common stock, they are available for distribution 

by resolution of the stockholders’ meeting. Legal earnings 

reserve is included in retained earnings. The maximum amount 

that the Company can distribute as dividends is calculated based on 

the non-consolidated financial statements of the Company in 

accordance with the Commercial Code. 

Effective from the period ended September 30, 2003, the components 

of the stockholders’ equity are presented in accordance 

with the change in Japanese disclosure requirements. 

(m) TREASURY STOCK AND REDUCTION OF STATUTORY 

RESERVES 

The Companies have adopted Accounting Standard No. 1, 

“Accounting Standard for Treasury Stock and Reduction of 

Statutory Reserves”, issued by the Accounting Standards Board of 

Japan on February 21, 2002. 

The effect on the accompanying consolidated financial 

statements would be immaterial. 

(n) ACCOUNTING FOR LEASES 

Finance lease transactions, except those leases for which the 

ownership of the leased assets is considered to be transferred to the 

lessee, are accounted for in the same manner as operating leases. 

(o) INCOME TAXES 

The Companies provide for income taxes applicable to all items 

included in the consolidated statements of income regardless of 

when such taxes are currently payable. Income taxes based on 

temporary differences between tax and financial reporting 

purposes are reflected as deferred income taxes in the consolidated 

financial statements using the asset and liability method. 

(p) NET INCOME PER SHARE 

Basic net income per share is computed by dividing income 

available to common stockholders by the weighted-average 

number of common shares outstanding for the period. Diluted net 

income per share reflects the potential dilution that could occur if 

securities or other contracts to issue common stock were 

exercised or converted into common stock. 

Effective February 1, 2003, the Company adopted the new 

accounting standard for earnings per share and related guidance 

(Accounting Standards Board Statement No. 2, “Accounting 

Standard for Earnings Per Share” and Financial Standards 

Implementation Guidance No. 4, “Implementation Guidance for 

Accounting Standard for Earnings Per Share”, issued by the 

Accounting Standards Board of Japan on September 25, 2002). 

20

The new accounting standard requires calculating net income 

available to common stockholders by deducting of amounts not 

belonging to common stock (e.g. bonuses to directors appropriated 

from retained earnings which is to be resolved at the annual 

3. TRANSLATION INTO UNITED STATES DOLLARS 

The accompanying consolidated financial statements are stated in 

Japanese yen. The translations of the Japanese yen amounts into 

U.S. dollars are included solely for the convenience of readers, 

using the prevailing exchange rate at September 30, 2003, which 

stockholders’ meeting held after the period-end) from net income 

to figure out the basis for the net income per share. The effect on 

net income per share by the adoption of the new accounting 

standard would be immaterial. 

was ¥111 to U.S.$1. The convenience translations should not be 

construed as representations that the Japanese yen amounts have 

been, could have been, or could in the future be, converted into 

U.S. dollars at this or any other rate of exchange. 

4. RECONCILIATION OF “CASH” AND “CASH AND CASH EQUIVALENTS” 


Thousands of 

U.S. dollars 

2003/9 2003/1 2003/9 

Cash shown in the consolidated balance sheet ................................................................................... ¥68,616 ¥64,754 $618,162 

Cash equivalents.................................................................................................................................. – – – 

Cash and cash equivalents................................................................................................................... ¥68,616 ¥64,754 $618,162 

5. INVENTORIES 

Inventories consist of the following: 

Thousands of 


U.S. dollars 

2003/9 2003/1 2003/9 

Merchandise ........................................................................................................................................ ¥50,911 ¥50,268 $458,658 

Work in progress ................................................................................................................................. 804 920 7,243 

Supplies ............................................................................................................................................... 326 378 2,937 

Total ......................................................................................................................................... ¥52,041 ¥51,566 $468,838 

6. SECURITIES 

(i) Acquisition costs, book value and fair value of securities with available fair value as of September 30 and January 31, 2003, 

are as follows: 

Held-to-maturity debt securities Millions of yen Thousands of U.S. dollars 

2003/9 2003/1 2003/9 

Book Fair Book Fair Book Fair 

value value Difference value value Difference value value Difference 

Securities with available fair value exceeding book value: 

Government bonds...................................................... ¥ – ¥ – ¥ – ¥ – ¥ – ¥ – $ – $ – $ – 

Corporate bonds.......................................................... 10,000 10,017 17 10,000 10,011 11 90,090 90,243 153 

Others.......................................................................... – – – – – – – – – 

Total.....................................................................¥10,000 ¥10,017 ¥17 ¥10,000 ¥10,011 ¥11 $90,090 $90,243 $153 

Securities with available fair value not exceeding 

book value: 

Government bonds...................................................... ¥ – ¥ – ¥ – ¥ – ¥ – ¥ – $– $– $ – 

Corporate bonds.......................................................... – – – – – – – – – 

Others.......................................................................... – – – – – – – – – 

Total..................................................................... ¥ – ¥ – ¥ – ¥ – ¥ – ¥ – $ – $ – $ – 

Available-for-sale securities Millions of yen Thousands of U.S. dollars 

2003/9 2003/1 2003/9 

Acquisition Book Acquisition Book Acquisition Book 

cost value Difference cost value Difference cost value Difference 

Securities with book value exceeding acquisition costs: 

Equity securities.......................................................... ¥2,176 ¥5,937 ¥3,761 ¥917 ¥3,229 ¥2,312 $19,604 $53,487 $33,883 

Bonds........................................................................... – – – – – – – – – 

Others.......................................................................... – – – – – – – – – 

Total..................................................................... ¥2,176 ¥5,937 ¥3,761 ¥917 ¥3,229 ¥2,312 $19,604 $53,487 $33,883 

Securities with book value not exceeding 

acquisition costs: 

Equity securities.......................................................... ¥7,700 ¥5,101 ¥(2,599) ¥8,948 ¥5,720 ¥(3,228) $69,369 $45,955 $(23,414) 

Bonds........................................................................... – – – – – – – – – 

Others.......................................................................... – – – – – – – – – 

Total..................................................................... ¥7,700 ¥5,101 ¥(2,599) ¥8,948 ¥5,720 ¥(3,228) $69,369 $45,955 $(23,414) 

21

(ii) Book values of securities with no available fair value as of September 30 and January 31, 2003, are as follows: 

Thousands of 

Available-for-sale securities Millions of yen U.S. dollars 

2003/9 2003/1 2003/9 

Book value 

Non-listed equity securities (over-the-counter securities are excluded) ............................................ ¥166 ¥204 $1,495 

(iii) Book values of securities by contractual maturities for securities classified as held-to-maturity as of September 30 and January 31, 2003, 

are as follows: 

Held-to-maturity debt securities Millions of yen Thousands of U.S. dollars 

2003/9 2003/1 2003/9 

Due within Due after one year Due within Due after one year Due within Due after one year 

one year through five years one year through five years one year through five years 

Government bonds..................................... ¥ – ¥ – ¥ – ¥ – $ – $ – 

Corporate bonds......................................... 10,000 – – 10,000 90,090 – 

Others ........................................................ – – – – – – 

Total ............................................... ¥10,000 ¥ – ¥ – ¥10,000 $90,090 $ – 

(iv) No available-for-sale securities were sold for the period ended September 30, 2003. For the year ended January 31, 2003, total sales of 

available-for-sale securities amounted to ¥147 million and related losses amounted to ¥48 million. 

7. PREPAID RENTS AND LEASE DEPOSITS 

The Company operates a number of stores under various lease 

arrangements. Typically, the Company advances the costs of construction 

of a store to the lessor and, upon completion of construction, 

leases the property for an initial period of generally 20 years. 

Approximately 30% of the construction advance is considered a 

lease deposit, refundable at the end of the lease term. The remaining 

portion of the advance is refundable in installments over the 

second half of the lease term together with nominal interest. The 

Company accounts for this remaining portion as prepaid rents in 

the accompanying consolidated financial statements. Rent 

payments under store leases are normally fixed amounts that are 

renegotiated every two or three years. 

8. SHORT-TERM LOANS AND LONG-TERM DEBT 

(a) Short-term loans including bank overdrafts at September 30 and January 31, 2003, consist of the following: 


Thousands of 

U.S. dollars 

2003/9 2003/1 2003/9 

Short-term loans.................................................................................................................................. ¥57,790 ¥46,100 $520,631 

The weighted-average interest rates applicable to the bank borrowings are 1.0% per annum in September 30, 2003, and 1.1% per 

annum in January 31, 2003. 

(b) Long-term debt at September 30 and January 31, 2003, consists of the following: 

Thousands of 


U.S. dollars 

2003/9 2003/1 2003/9 

1.70% unsecured bonds due in 2012 .................................................................................................. ¥ 20,000 ¥ 20,000 $ 180,180 

1.15% unsecured bonds due in 2009 .................................................................................................. 20,000 20,000 180,180 

0.99% unsecured bonds due in 2008 .................................................................................................. 40,000 40,000 360,360 

1.15% unsecured convertible bonds, convertible into common stock at ¥2,153.0 per share, due in 2012.. 39,839 39,839 358,910 

Unsecured loans from banks and an insurance company, 1.42% per annum .................................... 9,850 9,850 88,739 

Less current maturities........................................................................................................................ – – – 

Total ............................................................................................................................................. ¥129,689 ¥129,689 $1,168,369 

The annual maturities of long-term debt as of September 30, 2003, are as follows: 

Thousands of 

Millions of yen U.S. dollars 

2004 ......................................................................................................................................................................... ¥ 3,600 $ 32,432 

2005 ......................................................................................................................................................................... 2,000 18,018 

2006 ......................................................................................................................................................................... 2,750 24,775 

2007 ......................................................................................................................................................................... 1,500 13,513 

2008 and thereafter .................................................................................................................................................. 119,839 1,079,631 

Total.................................................................................................................................................................. ¥129,689 $1,168,369 

22

9. LEASES 

(a) Pro forma information relating to acquisition cost, accumulated depreciation and book values for property held under finance leases 

which do not transfer ownership of the leased property to the lessee on an “as if capitalized” basis for the period ended September 30, 

2003, and the year ended January 31, 2003, was as follows: 

Thousands of 


U.S. dollars 

2003/9 2003/1 2003/9 

Store fixtures and equipment 

Acquisition cost................................................................................................................................... ¥ 4,528 ¥ 4,573 $ 40,793 

Accumulated depreciation................................................................................................................... (2,257) (1,970) (20,333) 

Book value ........................................................................................................................................... ¥ 2,271 ¥ 2,603 $ 20,460 

(b) Future minimum lease payments under finance leases as of September 30 and January 31, 2003, were as follows: 


Thousands of 

U.S. dollars 

2003/9 2003/1 2003/9 

Due within one year ............................................................................................................................ ¥ 903 ¥ 950 $ 8,135 

Due after one year ............................................................................................................................... 1,368 1,653 12,324 

Total................................................................................................................................................. ¥2,271 ¥2,603 $20,459 

The pro forma information above does not exclude the imputed interest portion from the acquisition cost because the remaining 

finance lease obligations are not material compared with the book value of property and equipment. 

(c) Total payments for finance lease transactions without ownership transfer to lessees for the period ended September 30, 2003, and the 

year ended January 31, 2003, were as follows: 

Thousands of 


U.S. dollars 

2003/9 2003/1 2003/9 

Lease payments.................................................................................................................................... ¥682 ¥1,025 $6,144 

Depreciation expense .......................................................................................................................... 682 1,025 6,144 

(d) The minimum rental commitments under noncancellable operating leases as of September 30 and January 31, 2003, 

were as follows: 

Thousands of 


U.S. dollars 

2003/9 2003/1 2003/9 

(As lessee) 

Due within one year ........................................................................................................................ ¥ 3,991 ¥ 4,110 $ 35,955 

Due after one year ........................................................................................................................... 21,110 26,855 190,180 

Total ............................................................................................................................................. ¥25,101 ¥30,965 $226,135 

(As lessor) 

Due within one year ........................................................................................................................ ¥316 ¥316 $2,847 

Due after one year ........................................................................................................................... 379 590 3,414 

Total ............................................................................................................................................. ¥695 ¥906 $6,261 

10. SEVERANCE AND RETIREMENT BENEFITS FOR EMPLOYEES 

The Company and its consolidated subsidiaries had adopted a Also, the Company’s consolidated subsidiaries demolished the 

non-contributory defined pension plan supported by the privately held pension plan and the lump-sum severance and 

government, a privately held pension plan and a lump-sum retirement payment plan, and many of the Company’s employees 

severance and retirement plan as defined benefit plans for transferred to the subsidiaries in accordance with the transition 

employees. 

toward the new personnel system as a part of management 

In connection with enforcement of the Defined Benefit reforms on September 30, 2003. 

Enterprise Pension Law, the Company and some of its As a result, the Company’s privately held pension plan and 

consolidated subsidiaries received approval from the Minister of lump-sum severance and retirement payment plan only exist on 

Health, Labor and Welfare for winding up the non-contributory September 30, 2003. 

defined benefit pension plan supported by the government and The liabilities for severance and retirement benefits included in 

exemption from payment of future benefits on March 18 and the liability section of the consolidated balance sheets as of 

September 26, 2003. 

September 30 and January 31, 2003, consist of the following: 

23


Thousands of 

U.S. dollars 

2003/9 2003/1 2003/9 

(a) Present value of the future obligations .......................................................................................... ¥ (6,320) ¥(149,076) $ (56,937) 

(b) Pension plan assets........................................................................................................................ 22,317 61,367 201,054 

(c) Unfunded obligations of severance and retirement benefits ((a)+(b)) ......................................... 15,997 (87,709) 144,117 

(d) Unrecognized actuarial losses ....................................................................................................... 1,560 43,359 14,054 

(e) Subtotal ((c)+(d)).......................................................................................................................... 17,557 (44,350) 158,171 

(f) Prepaid pension expense............................................................................................................... 18,857 6,041 169,883 

(g) Severance and retirement benefits for employees ((e)–(f)) .......................................................... ¥ (1,300) ¥ (50,391) $ (11,712) 

Severance and retirement benefit costs included in the consolidated statements of income for the period ended September 30, 2003, 

and the year ended January 31, 2003, are comprised of the following: 

Thousands of 


U.S. dollars 

2003/9 2003/1 2003/9 

Service costs ........................................................................................................................................ ¥2,187 ¥ 4,890 $19,702 

Interest costs........................................................................................................................................ 1,322 3,826 11,910 

Expected return on plan assets............................................................................................................ (573) (1,953) (5,162) 

Amortization of actuarial gains and losses .......................................................................................... 1,201 2,041 10,820 

Severance and retirement benefit costs for employees........................................................................ ¥4,137 ¥ 8,804 $37,270 

Gain on winding up of the non-contributory defined benefit pension plan....................................... ¥(28,564) ¥ – $(257,333) 

Loss on partial termination of privately held pension plan and loss on partial termination 

of lump-sum severance and retirement payment plan ...................................................................... 396 – 3,568 

In addition to the above, the Company and its consolidated subsidiaries recognized special termination benefits paid to employees, 

which consist of premium severance pay, etc., amounted to ¥14,901 million ($134,243 thousand) as part of special losses. 

The discount rate and the rate of expected return on plan assets used by the Companies are 2.0% and 2.5%, respectively. 

The estimated amount of all severance and retirement benefits to be paid in the future is allocated equally to each service year using the 

estimated number of total service years. 

11. INCOME TAXES 

The Companies are subject to a number of income taxes, which, in the aggregate, indicate a statutory rate in Japan of approximately 

40.5% for the period ended September 30, 2003, and 42.1% for the years ended January 31, 2003 and 2002. 

(a) Significant components of the Companies’ deferred income tax assets and liabilities as of September 30 and January 31, 2003, 

were as follows: 

Thousands of 


U.S. dollars 

2003/9 2003/1 2003/9 

Deferred income tax assets: 

Retirement benefits.......................................................................................................................... ¥ – ¥13,618 $ – 

Depreciation .................................................................................................................................... 4,470 4,447 40,270 

Accrued bonuses.............................................................................................................................. 2,644 – 23,820 

Unrealized profits for property and equipment transferred among the Companies ....................... 2,515 2,306 22,658 

Accrued enterprise tax..................................................................................................................... – 826 – 

Tax loss carry forward ..................................................................................................................... 16,354 821 147,333 

Allowance for doubtful accounts..................................................................................................... 1,399 1,044 12,604 

Other ............................................................................................................................................... 3,762 4,006 33,892 

Gross deferred income tax assets................................................................................................. 31,144 27,068 280,577 

Valuation allowance..................................................................................................................... (691) (394) (6,225) 

Total deferred income tax assets .............................................................................................. 30,453 26,674 274,352 

Deferred income tax liabilities: 

Deferred gains on sales of property and equipment ........................................................................ (4,763) (4,608) (42,910) 

Prepaid pension expense ................................................................................................................. (8,625) – (77,703) 

Reserve for special depreciation ...................................................................................................... (2,299) (2,255) (20,712) 

Profits on installment sales.............................................................................................................. (259) (712) (2,333) 

Other ............................................................................................................................................... (1,117) (19) (10,063) 

Total deferred income tax liabilities......................................................................................... (17,063) (7,594) (153,721) 

Net deferred income tax assets ............................................................................................ ¥13,390 ¥19,080 $120,631 

24

(b) The reconciliation between the Japanese statutory tax rate and the Company’s effective tax rate for the period ended September 30, 2003, is 

summarized as follows: 

Statutory tax rate................................................................................................................................................................................. 42.1 % 

Non-deductible expenses.................................................................................................................................................................... 0.5 

Non-taxable dividend income............................................................................................................................................................. (0.5) 

Unrealized taxable income of deficit subsidiary ................................................................................................................................. 2.7 

Per capita inhabitants’ tax................................................................................................................................................................... 0.9 

Adjustment on deferred tax assets due to change of income tax rate................................................................................................. 0.9 

Other ................................................................................................................................................................................................... 3.2 

Effective tax rate.......................................................................................................................................................................... 49.8 % 

Disclosure of the reconciliation between the statutory tax rate and the effective tax rate for the year ended January 31, 2003, is omitted since 

the difference is immaterial. 

(c) Change in effective tax rates to be used in calculating deferred taxes due to the revised local tax law 

The aggregate statutory income tax rate used for calculation of deferred income tax assets and liabilities was 42.1% for the years 

ended January 31, 2003 and 2002. According to the Act for Partial Revision of Local Tax Law proclaimed March 31, 2003, the 

statutory effective tax rate, which is used for calculation of deferred tax assets and liabilities relating to temporary differences for the 

periods after April 1, 2004, is changed from 42.1% to 40.5%. The effect of this change is immaterial. 

(d) Change in effective tax rates to be used in calculating deferred taxes due to the revised Tokyo Metropolitan Bylaw (changed after September 30, 2003) 

According to the Partial Revision of Tokyo Metropolitan Bylaw proclaimed October 14, 2003, the statutory effective tax rate, which 

is used for calculation of deferred tax assets and liabilities relating to temporary differences for the periods after April 1, 2004, is 

changed from 40.5% to 40.7%. The effect of this change is immaterial. 

12. CONTINGENT LIABILITIES 

The Companies were contingently liable at September 30, 2003, for the following: 

Thousands of 


Loan guarantees made for employees.......................................................................................................................... ¥24 $216 

13. NET INCOME PER SHARE 

Effective February 1, 2003, the Company adopted the new 

accounting standard for earnings per share and related guidance 

(Accounting Standards Board Statement No. 2, “Accounting 

Standard for Earnings Per Share” and Financial Standards 

Implementation Guidance No. 4, “Implementation Guidance for 

Accounting Standard for Earnings Per Share”, issued by the 

Accounting Standards Board of Japan on September 25, 2002). 

Reconciliation of the difference between basic and diluted net 

income per share (“EPS”) for the period ended September 30, 

2003, is as follows: 

Period ended September 30, 2003 

Thousands 

Millions of yen of shares Yen U.S. Dollars 

Weightedaverage 

number 

Net income of shares EPS 

Net income................................................................................................................... ¥6,154 

Amounts not belonged to common stock 

(Bonuses to directors from retained earnings)....................................................... 58 

Basic EPS 

Net income available to common stockholders ....................................................... 6,096 353,810 ¥17 $0.15 

Effect of dilutive securities 

Convertible bonds .................................................................................................... 179 18,503 

Diluted EPS 

Net income for computation .................................................................................... 6,275 372,313 17 0.15 

The information above was not required to be disclosed by the Ministry of Finance Ordinance for the years ended January 31, 2003 and 2002. 

14. SEGMENT INFORMATION 

The Companies operate principally in two business segments, 

Merchandising and Credit and Consumer Services. 

Merchandising involves the sale of apparel, luxury and 

accessory goods, furniture and household appliances and 

foodstuffs. Credit and Consumer Services involve finance charges 

earned on installment sales, annual fees for the Marui Card and 

the Akai Card and consumer loans—principally cash dispensing 

services and general purpose loans—and referral and agency 

services for travel, driving schools, insurance and others. Credit 

and Consumer Services revenues consist of commissions and 

interest income on consumer loans. 

Other segment revenues include interior design, construction and 

advertising services; information processing services and sales of 

computer software; and transportation services. Intersegment prices 

are determined by negotiations between the parties involved. 

25

Operating income includes revenues less operating expenses 

but excluding general corporate expenses, interest expenses, 

unrealized foreign currency exchange gain (loss), other income 

and provision for income taxes. Identifiable assets are those assets 

used in the Companies’ operations in each segment. Corporate assets 

consist principally of cash, deposits and short-term investments. 



Credit and 

Merchan- Consumer Corporate or 

dising Services Other Total Elimination Consolidated 


Outside customers.............................................. ¥273,713 ¥43,927 ¥35,768 ¥353,408 ¥ – ¥353,408 

Intersegment ...................................................... – – 29,534 29,534 (29,534) – 

Total................................................................ 273,713 43,927 65,302 382,942 (29,534) 353,408 

Operating expenses................................................ 268,303 35,075 61,321 364,699 (27,300) 337,399 

Operating income .................................................. ¥ 5,410 ¥ 8,852 ¥ 3,981 ¥ 18,243 ¥ (2,234) ¥ 16,009 

Identifiable assets ................................................... ¥309,534 ¥290,056 ¥65,617 ¥665,207 ¥68,950 ¥734,157 

Depreciation and amortization............................... 9,697 1,741 1,371 12,809 (567) 12,242 

Capital expenditures, 

including lease advances...................................... 9,875 1,534 940 12,349 (669) 11,680 


Year ended January 31, 2003 

Credit and 




Outside customers.............................................. ¥444,013 ¥64,926 ¥49,928 ¥558,867 ¥ – ¥558,867 

Intersegment ...................................................... – – 40,563 40,563 (40,563) – 

Total................................................................ 444,013 64,926 90,491 599,430 (40,563) 558,867 

Operating expenses................................................ 428,798 47,355 84,943 561,096 (36,546) 524,550 

Operating income .................................................. ¥ 15,215 ¥17,571 ¥ 5,548 ¥ 38,334 ¥ (4,017) ¥ 34,317 

Identifiable assets ................................................... ¥296,606 ¥284,278 ¥68,757 ¥649,641 ¥80,260 ¥729,901 

Depreciation and amortization............................... 14,351 2,664 2,377 19,392 (612) 18,780 


including lease advances...................................... 21,260 3,473 1,237 25,970 (1,004) 24,966 

Thousands of U.S. dollars 


Credit and 




Outside customers........................................... $2,465,883 $395,739 $322,234 $3,183,856 $ – $3,183,856 

Intersegment.................................................... – – 266,072 266,072 (266,072) – 

Total ............................................................. 2,465,883 395,739 588,306 3,449,928 (266,072) 3,183,856 

Operating expenses ............................................. 2,417,144 315,991 552,442 3,285,577 (245,946) 3,039,631 

Operating income................................................ $ 48,739 $ 79,748 $ 35,864 $ 164,351 $ (20,126) $ 144,225 

Identifiable assets ................................................ $2,788,595 $2,613,117 $591,144 $5,992,856 $621,171 $6,614,027 

Depreciation and amortization............................ 87,360 15,685 12,351 115,396 (5,108) 110,288 


including lease advances ................................... 88,964 13,820 8,468 111,252 (6,027) 105,225 

15. SUBSEQUENT EVENT 

The following appropriations of retained earnings were approved at the annual general meeting of the stockholders held on 

December 25, 2003: 

Thousands of 


Cash dividends (¥15=$0.14 per share) ......................................................................................................................... ¥5,272 $47,495 

Bonuses to directors ...................................................................................................................................................... 58 522 

26

INDEPENDENT AUDITORS’ REPORT 

To the Stockholders and Board of Directors of 


We have audited the accompanying consolidated balance sheets of Marui Co., Ltd. (a Japanese corporation) 

and its consolidated subsidiaries as of September 30, 2003, and January 31, 2003, and the related 

consolidated statements of income, stockholders’ equity and cash flows for the period ended September 30, 

2003, and the two years in the period ended January 31, 2003 and 2002, expressed in Japanese yen. These 

consolidated financial statements are the responsibility of the Company’s management. Our responsibility is 

to express an opinion on these consolidated financial statements based on our audits. 

We conducted our audits in accordance with auditing standards generally accepted in Japan. Those standards 

require that we plan and perform the audit to obtain reasonable assurance about whether the financial 

statements are free of material misstatement. An audit includes examining, on a test basis, evidence 

supporting the amounts and disclosures in the financial statements. An audit also includes assessing the 

accounting principles used and significant estimates made by management, as well as evaluating the overall 

financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, 

the consolidated financial position of Marui Co., Ltd. and its consolidated subsidiaries as of September 30, 

2003, and January 31, 2003, and the consolidated results of their operations and their cash flows for the 

period ended September 30, 2003, and the two years in the period ended January 31, 2003 and 2002, in 

conformity with accounting principles generally accepted in Japan as described in Note 1 to the consolidated 

financial statements. 

Without qualifying our opinion, we draw attention to Note 2 to the consolidated financial statements; Marui 

Co., Ltd. and its consolidated subsidiaries have adopted the new Japanese accounting standards for severance 

and retirement benefits for employees and financial instruments in the year ended January 31, 2002. 

The consolidated financial statements as of and for the period ended September 30, 2003, have been translated 

into United States dollars solely for the convenience of the reader. We have recomputed the translation and, 

in our opinion, the consolidated financial statements expressed in Japanese yen have been translated into 

United States dollars on the basis set forth in Note 3 to the consolidated financial statements. 

Tokyo, Japan 

December 25, 2003 

27

STORE INFORMATION 

(As of January 31, 2004) 

STORE LOCATIONS 

Kawagoe 

4 

Omiya 

Tokorozawa 

Family Shiki 

Kawaguchi 

Soka 

10 Kashiwa 

Koriyama 

Mito 14 

Tsuchiura 

Kobe Marui Numazu 

13 Shizuoka 

Nanba 

Ikebukuro 


11 2 

mini Tachikawa Kichijoji 

City Ueno 

Shinjuku 

7 

1 

8 Kinshicho 

Hachioji Family Kokubunji Nakano 

Yurakucho 

5 Shibuya 

Family 

Mizonokuchi 

3 

Oimachi 

Tsudanuma 

9 

Machida 

12 Kawasaki 

City Yokohama 

6 

15 Family Ebina 

Totsuka 16 

Fujisawa 

Number of stores: 29 

Newly opened store 

Scheduled store opening 

Closed store 

Scheduled store closure 

NEWLY OPENED STORE 

NEW STORES SCHEDULED FOR OPENING 

Kobe Marui 

(Opened in October 2003) 


(Scheduled to open in February 2004) 


(Scheduled to open in spring 2007) 

Nanba Store 

(Scheduled to open in autumn 2006) 

*Store designing in progress 

MAJOR STORES 

1 

Shinjuku Store 

City Shinjuku 

Men Shinjuku Field Shinjuku Young Shinjuku One Shinjuku in The Room 

28

2 City Ueno 

3 Family Mizonokuchi 

4 Omiya Store 5 Shibuya Store 

City Shibuya 

Young Shibuya 

6 City Yokohama 7 Family Kokubunji 8 Kinshicho Store 

9 

Machida Store 

be Machida 

mini Machida 

10 

Kashiwa Store 

11 

Ikebukuro Store 

12 

Kawasaki Store 

Marui Kashiwa 

VAT 

City Ikebukuro 

in The Room 

13 

Shizuoka Store 

14 

Mito Store 

15 

Family Ebina 

16 

Totsuka Store 

Marui Shizuoka 

Keyaki Plaza Shizuoka 

29

MARUI GROUP COMPANIES 

(As of October 1, 2003) 

TRANSPORTATION 

Moving Co., Ltd.* 

This company, a 92.7%-owned subsidiary of 

Marui Co., Ltd., provides delivery of merchandise 

for Marui and other companies as well as general 

transportation services, such as parcel delivery 

and moving. 

Head Office: 

1-28-11, Shinjuku, Shinjuku-ku, 

Tokyo 160-0022, Japan 

Incorporated: October 1960 

Capitalization: ¥1,450 million 

Number of Employees: 1,179 

* Consolidated subsidiary 

CASHING AND CREDIT-CARD-RELATED SERVICES 

Zero First Co., Ltd.* 

This company, a wholly owned subsidiary of 

Marui Co., Ltd., operates roadside branches that 

provide cashing and other credit-card-related 

services and travel agency services. 

Head Office: 

5-49-4, Chuo, Nakano-ku, 


Incorporated: February 1991 

Capitalization: ¥300 million 

Number of Employees: 949 

BUILDING SECURITY AND MAINTENANCE 

CSC Co., Ltd.* 

This company, a 78.6%-owned subsidiary of 

Marui Co., Ltd., handles building security and 

maintenance for Marui and other companies. 

Head Office: 

4-60-3, Chuo, Nakano-ku, 


Incorporated: July 1987 



ADVERTISING AND DISPLAY 

AIM Create Co., Ltd.* 


Marui Co., Ltd., handles advertising, design and 

display of commercial facilities, and public relations 

for Marui and other companies. 

Head Office: 

3-31-1, Nakano, Nakano-ku, 


Incorporated: August 1959 



INFORMATION PROCESSING SERVICES 

M&C Systems Co., Ltd.* 


Marui Co., Ltd., provides information processing 

services and sells computer software that it develops 

for use in credit and marketing management. 

Head Office: 

1-16-18, Minami-Ikebukuro, 

Toshima-ku, Tokyo 171-0022, Japan 

Incorporated: September 1984 



ENTERTAINMENT SOFTWARE PRODUCTS 

Virgin Megastores Japan Ltd. 


Marui Co., Ltd., is an exciting and innovative 

retailer of entertainment software products and 

was established as a joint venture with the Virgin 

Group, of the U.K. 

Head Office: 

2nd floor, Kishino Building, 

3-30-13, Nishi-Ikebukuro, Toshima-ku, 


Incorporated: June 1990 



30

ADMINISTRATIVE SERVICES 

Marui Smart Support Co., Ltd.* 


Marui Co., Ltd., provides administrative services 

for Marui Group companies and Marui stores. 

Head Office: 



Incorporated: January 2003 



SALES 

Marui Fashion Freak Co., Ltd.* 


Marui Co., Ltd., operates Marui’s women’s and 

children’s fashion private brand shops, including 

ru and tasse tasse, and Marui’s women’s shoe, bag, 

and accessory shops. 

Head Office: 






Marui M’s Mode Co., Ltd.* 


Marui Co., Ltd., operates Marui’s men’s fashion 

and sports private brand shops, including 

Visaruno and ON BOARD. 

Head Office: 






Marui Access Co., Ltd.* 


Marui Co., Ltd., operates Marui’s watch, eyeglass, 

accessory, and interior goods specialty shops. 

Head Office: 



Incorporated: December 1971 



Marui Seasoning Co., Ltd.* 


Marui Co., Ltd., operates Marui’s sales floor of 

foodstuffs. 

Head Office: 



Incorporated: May 2003 



LOGISTICS SUPPORT 

Marui Kit Center Co., Ltd. 


Marui Co., Ltd., sorts certain product inventories 

and store supplies. 

Head Office: 

2nd Building, Toda Shohin Center, 

2-5-1, Bijyogi Higashi, Toda-shi, 

Saitama 335-8792, Japan 

Incorporated: October 2003 



31

BOARD OF DIRECTORS 

(As of December 25, 2003) 

Tadao Aoi 

President 

President 

Tadao Aoi 

Executive Vice President 

Chuzaburo Aoi 

Senior Managing Director 

Yoneaki Sakai 

Managing Directors 

Takeshi Kida 

Hiroshi Aoi 

Ryoichi Horiuchi 

Directors 

Kyojiro Kitade 

Shigeru Omori 

Yuji Kawashita 

Tatsuya Shinose 

Corporate Auditors 

Yasuyuki Watanabe 

Shozo Uchino 

Yukihisa Inamura 

Sumio Yoshizawa 

Chuzaburo Aoi 

Executive Vice President 

Yoneaki Sakai 

Senior Managing Director 

Takeshi Kida 

Managing Director 

Hiroshi Aoi 


Ryoichi Horiuchi 


Kyojiro Kitade 

Director 

Shigeru Omori 

Director 

Yuji Kawashita 

Director 

Tatsuya Shinose 

Director 

32

CORPORATE DATA 

(As of September 30, 2003) 

INVESTOR INFORMATION 

(As of September 30, 2003) 

Head Office 

Stock Listing 

4-3-2, Nakano, Nakano-ku, Tokyo 164-8701, Japan 

Tel: (03) 3384-0101 

Fax: (03) 5343-6640 

URL: http://www.0101.co.jp 

Date of Foundation 

February 17, 1931 

Date of Establishment 

March 30, 1937 

Consolidated Stockholders’ Equity 

¥414,456 million 

Common Stock 

Authorized: 1,400,000 thousand shares 

Issued: 368,660 thousand shares 

Number of Employees (Consolidated) 

9,181 

Sales Floor Space 

488,875 m 2 

Tokyo Stock Exchange 

Transfer Agent 

UFJ Trust Bank Limited 

1-4-3, Marunouchi, Chiyoda-ku, Tokyo 100-0005, Japan 

Composition of Stockholders 

By number of stockholders 

Financial Institutions 

Security Companies 

Other Companies and Institutions 

Major Stockholders (Top 5) 

Japan Trustee Services Bank, Ltd. 

The Master Trust Bank of Japan, Ltd. 

The Bank of Tokyo-Mitsubishi, Ltd. 

Nippon Life Insurance Company 

The Chase Manhattan Bank, N.A. London 

Stock Price/Trading Volume 

By number of stocks held 

Foreign Investors 

Individuals and Other 

Treasury Stock 

2,000 

(¥) 

1,500 

1,000 

500 

0 

50,000 

(Thousand shares) 

25,000 

0 

’03/2 ’03/3 ’03/4 ’03/5 ’03/6 ’03/7 ’03/8 ’03/9 

Marui’s Head Office 

Photographs of board of directors by Sanae Numata 

Other major photographs by Nobuyuki Suzuki 

33

MARUI CO., LTD. 

Head Office: 4-3-2, Nakano, Nakano-ku, Tokyo 164-8701, Japan 

Tel: (03) 3384-0101 Fax: (03) 5343-6640 URL: http://www.0101.co.jp 

Printed in Japan

MARUI CO., LTD.

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