FYE 5/2018 (6/17-5/18) Results Explanatory Meeting
July 13, 2018
The earnings forecasts appearing in this material are based on the business environment at the present time, andthere is the possibility that actual earnings may differ from forecasts for various reasons.
Furthermore, only inquiries in Japanese are handled.
Inquiries should be direct to Mr. Kasai or Mr. Tamura (045-914-8241) in the Corporate Planning office.

1

FYE 5/2018 Results
1. Profit and Loss Statement (Consolidated)
2. Balance Sheet (Consolidated)
3. New Store Openings
4. Renovation of Existing Stores
5. Performance Highlights
6. Profit and Loss Statement (Create SD)

FYE 5/2019 Forecasts
1. Store Opening Strategy
2. Store Openings and Renovation
3. Improvement of Gross Profit
4. Cost Reduction
5. Prescription Department
6. Nursing-Care Business
7. FYE 5/2019 Forecasts (Consolidated)

2

FYE 5/2018 Results

31. FYE 5/2018 Consolidated Profit and Loss Statement
FYE 5/2017

FYE 5/2018(consolidated)(consolidated)(million yen)

Share(%)(million yen)

Share(%)% ofYoYchangeadjustment inprojection

(%)

(%)

Net sales

247,341100.0

268,161100.0

108.499.8

Gross profit

68,14927.6

73,681

27.5

108.1

99.3

SG&A
expenses
Operatingprofit

53,70721.7

59,819

22.3

111.4

100.2

14,441

5.8

13,861

5.2

96.0

95.6

Recurringprofit

14,7686.0

14,236

5.3

96.4

96.2

Net profit

10,119

4.1

9,540

3.6

94.3

98.1
4

2. FYE 5/2018 BS (Consolidated)

Total assets

End of FYE 5/2017

End of FYE 5/2018(Consolidated)(Consolidated)

110,480

Main causes

Change121,412 +10,932

of changes■Total assets
・ Increase of 2,961 million yen inmerchandise

Current assetsFixed assets

67,79842,68273,013
48,399+5,214+5,717

・ Increase of 1,112 million yen in
cash equivalent, etc.
・ Increase of 4,266 million yen in
fixed assets due to new store
openings, etc.

Total liabilities

48,57852,035+3,456 ■Total liabilities
・ Increase of 2,188 million yen in

Current liabilities

44,15747,019+2,861accounts payable
・ Increase of 249 million yen in
asset retirement obligations

Fixed liabilities

Total net assets
Total liabilities andnet assets

4,420

5,015+594

61,901

69,377+7,475■ Total net assets
・ Posted net income of
9,540 million yen

110,480

121,412 +10,932

・ 2,086 million yen dividend
payment(million yen)5

3. New Store Openings
 OTC: 51 store openings /Prescription drug stores: 29 store openings (in-storepharmacies: 24 stores and dedicated prescription drug stores: 5 stores)
Number ofstore
openings inFYE May
2018

Kanagawa

Tokyo

Shizuoka

Chiba

OtherTotal

In-store pharmacies

2413431490

1251952673076
1663036
8

20038
951
245559149

Rate of pharmacy establishment inOTC stores

28.7%

27.4%

21.1%

22.2%

23.7%

26.7%

Dedicated prescription drug stores

25339710207623824036595

OTCIn-store pharmacies
Dedicated prescription drug stores
OTC

Total
number ofstores as ofthe end ofFYE May
2018

Total number of stores• New openings of Cremo-style store: 4 stores

Store closures during FYE May 2018 - OTC： Contract expiration 1 store
Dedicated prescription drug stores: Improvement management efficiency 1 store

4. Renovation of Existing Stores
 OTC: 25 stores• Focus on food: 13 stores (H1: 12 stores and H2: 1 store)• Focus on non-food: 8 stores (H1: 2 stores and H2: 6 stores)
Format Change to Cremo: 1 store Prescription drug stores: 5 stores• Extension and renovation of pharmacies
and customer waiting space in response to
an increase in prescription drugs.

• In-store pharmacies, etc.: 4 stores65. Performance Highlights
Net Sales 108.5% vs. previous year, 99.7% vs. revised plan
Implemented measures to increase customers•Launched new sales promotion using coupons. Added more food and everyday household items to EDLP.
Number of customers at existing stores was 100.2% of the previous year’s figures against thebackground that competition between Create stores, not with competitors, started.
Sales of existing stores were 100.7% of the previous year’s figures due to an increase in the number ofcustomers and growth in the Prescription Department.
•Weather factors
 The growth rate slowed down due to weather conditions including a spell of rainy days in August,typhoons in October, and low temperatures in May.
Year-on-Year Changes in Sales and No. of Customers at Existing Stores106.0%

Coupon-based
sales promotion

104.0%
Focus on miscellaneous
goods pricing

102.0%Net Sales

100.0%
98.0%

Coupon-based
sales promotion

96.0%

Adverse weather
including spells ofrainy days andtyphoons.

No. ofcustomers

Focus on Food EDLP

94.0%
'17/6月'17/7月'17/8月'17/9月'17/10月'17/11月'17/12月'18/1月'18/2月'18/3月'18/4月'18/5月7

5. Performance Highlights
Net Sales■ Sales by Segment

FYE 5/2017
Net sales(million yen)

FYE 5/2018

Share
(%)

Net sales(million yen)

Share(%)

YoY
change(%)

Medical and healthproducts

58,13023.7

65,044

24.4

111.9

(O T C)39,69316.2

43,388

16.3

109.3

(Prescription)

18,437

7.5

21,6558.1

117.5

Cosmetics

35,64314.5

37,449

14.1

105.1

Food products

95,52838.9

104,819

39.4

109.7

Daily products

41,73917.0

43,932

16.5

105.3

Other

14,423

5.9

14,987

5.6

103.9

Total

245,466

100.0

266,233

100.0

108.5

* “Other” includes items such as stationery, baby products, clothing, pet products, gardening products, and film development services.

8

5. Performance Highlights
Gross Profit Ratio Gross profit ratio 27.7%  0.0% vs. previous year, -0.1% vs. revised plan
<Factors behind the decline in H1>-0.5% vs. previous year
• Focus on EDLP
• Implementation of new sales promotion
measures• Increase in new store openings (43 stores inprevious term  51 stores in current term)• Increase in loss due to expansion of food

<Improvement factors for H2>+0.3% vs. previous year
• Adjustment in balance between EDLP anditems under sales promotion• Review of sales promotion measures• Growth in Dispensing Department• Good performance of anti hay fever-related
items

SG&A Ratio SG&A ratio 22.8%, +0.6% vs. pervious year, +0.1% vs. revised plan
Personnel expenses: +0.5% (a rise in wage unit:+0.3%,an increase in working hours:+0.2%)• Revisions to allowances• A rise in initial hourly wage
• An increase in number of employees due to the accelerating pace of opening stores• A rise in working hours due to the expansion of food9

5. Performance Highlights (Dispensing Department)
FYE May 2017

FYE May 2018

18,43721,655117.5

Number of prescriptions (1,000 cases)

2,067

2,410

116.6

Prescription drug unit price (Yen)

8,757

8,837

100.9

Sales of existing stores (million yen)

17,466

20,176110.6

Number of prescriptions (1,000 cases)

1,965

2,213

108.2

Prescription drug unit price (Yen)

8,750

8,974

102.5

1,034

1,146

110.8

Number of stores (stores)

67

119

177.6

Number of prescriptions (1,000 cases)

68

74

109.5

40.4

41.6

+1.2

Sales of prescriptions in all stores （million yen)

Sales of home-care services (million yen)

Gross profit ratio of prescriptions in all stores (%)

Change Measures • Opened new stores to build a coordinated local health care system in the proximity of existing
pharmacies.
• Active expansion into the home medical care market• Standard dispensing system 55 stores• Generics dispensing systems Usage ratio: 75% or more at 104 stores and 65% or more at 60 stores106. FYE 5/2018 Profit and Loss Statement (Create SD)
FYE 5/2017(million yen)

FYE 5/2018

Share
（％）

(million yen)

% ofShare（％）

YoYchangeadjustment inprojection

(%)

(%)

Net sales245,466

100.0

266,233

100.0

108.5

99.7

Gross profit

68,10727.7

73,663

27.7

108.2

99.4

SG&A
expenses
Operatingprofit54,431

22.2

60,619

22.8

111.4

100.2

13,676

5.6

13,044

4.9

95.4

95.9

Recurringprofit13,992

5.7

13,408

5.0

95.8

96.1

Net profit

9,750

4.0

9,159

3.4

93.9

100.2

11

FYE 5/201
9 Forecasts
5/201912

1. Store Opening Strategy
 Dominant store openings in areas with a growing
population.
• Seven prefectures have seen their population
increase. (Tokyo, Kanagawa, Saitama, Chiba, Aichi, Fukuokaand Okinawa) Concentrate new stores openings in parts with an
inflow of people of existing areas.
• Business areas are contracting due to the shrinking
sphere of activities of consumers amid the ratio of
the elderly rising and life styles changing.
 Deepening of dominant store openings

Gunma
5 stores

Ibaraki
7 stores

Saitama
17 stores

Kanagawa
339 storesTokyo
102 stores
Chiba
38 stores

Aichi
11 stores
Shizuoka
76 stores*Shaded areas are prefectures witha growing population

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2. Store Openings and Renovation
Store Openings
 Trends in store openings
New openings
ClosuresNo. of storesat end of FY(Plan)FYE May 2015

FYE May 2016

FYE May 2017

FYE May 2018

FYE May 2019

34728
3435511523446471509559608• Open various types of stores in existing areas with a growing population• Open stores of Cremo: 5 stores

Renovation
 Concept of Renovation• Extension of the health & beauty productlineImprovement of gross profit rate byenhancing expertiseIntroduction of the essence of Cremo• Sales floor optimization in stores withexpanded food merchandiseReduction of losses and utility costs
Reduction of working hours by improving
operations.

14

3. Improvement of Gross Profit
 Return to reinforcement of expertise as drug stores

Specialty• Review merchandise lineups• Review sales promotional methods• Optimize food floor• Strengthen health care section• Introduce Cremo essence• Promote in-store pharmacies• Enhance health consultations

Health＆Beauty
Health support function
Self‐medication
Improvement ofpresymptomatic disease

Home care, Nursing care

ServiceSpecial order service
EC sitePurchase productdelivery service

Convenience
Daily necessities
Meat, vegetables,
Addition ofthe sum side dishVariety miscellaneous
goods
15

4. Cost Reduction
Productivity Improvement
 Logistics improvement and systemization• Enhance the accuracy computer-assisted ordering• Refine classifications of delivered goods• Introduce the system for checking expiration dates
Implement the above according to store characteristics to reduce working hours

 Personnel plan
• Review the standards for personnel allocation by store type to control
working hours• Reform for a diversified work styleLow-cost Measures Fixtures and Fittings• Reduce procurement costs through a competitive bidding including new suppliers Utilities expenses• Decrease the unit price for usage by changing suppliers

16

5. Prescription Department
Establishment of Coordinated Health-care System Trends in Store Openings(Plan)FYE May 2015

FYE May 2016

FYE May 2017

FYE May 2018

'FYE May 2019

Number of storeopenings

26

618

29

25

Number of stores atthe end of FY

139

142

157

185210• The opening of mainly in-store pharmacies in coordination with medical institutions

 Establishment of Local Support System• Expansion of demand for home-care services• Overhaul of health consultations
Show an appropriate treatment based on actual readings of blood tests, etc.
Attempts to form industry-government-academia collaboration in cooperation withadministration and universities• Coordination with other types of businessCoordination between clinics, OTC, pharmacies, and day-care service provider Salon
Day, and between doctors, pharmacists, and nutritionists

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5. Prescription Department
Response to Dispensing Fee Revision Basic dispensing fee
Targetfor end ofMay 2019

End of 6May 2018

End ofMarch2018

180
41points

179

25points

20points

41points

25points• The impact is small because
the majority of prescriptions
are received from multiple
medical institutions.

4206

15points

10points

41points

25points

15points

 Premiums for local support system(premiums for standard dispensing system before the revision)

End ofMarch2018

End of
May 2018

55
125
32points

52

Target ofend of
May 2019

133
0points

35points

0points

74
136
35points

0points• Try to solve this issue by
promoting the receipt ofprescriptions from multiple
10points
medical institutions.
• Try to expand stores eligible forpremiums through demand
increase for home-care service,reinforcement of healthconsultations and developmentof pharmacists.
• Make profits partly due to anincrease in premiums.

 Premiums for generics dispensing system
End ofMarch2018

60

End of
May 2018

16
104

873

Targetfor end of
May 2019

4246 6162
22points

18points

0points

26points

22points

18points

58 45

0points

26points

22points

18points• Forecast to close the year withprofits due to a plan forincreasing the number ofstores with a usage rate of 80%
or more although there is anegative impact from the raised
standards for usage rates.
0points18

6. Nursing-Care BusinessWell Life (fee-based nursing home business)
 Capture new residents• Double down on working on local welfare facilities and hospitals, etc.
• Improve services including enhancing events
Salon Day (Day-care service business) Opening of large-scale facilities• Open one-day type day-care service facilities that provide meals, assist in taking bath inaddition to functional training Increase the capacity of facilities• Convert facilities with the capacity to accommodate 10 people to ones
with a capacity of 16 or 18 people

197. FYE 5/2019 Forecasts (Consolidated)
FYE 5/2018

FYE 5/2019(consolidated)(consolidated)(million yen)

Share（％）(million yen)

Share（％）

YoYchange(%)

Net sales

268,161

100.0

290,900

100.0

108.5

Gross profit

73,68127.5

80,480

27.7

109.2

SG&A
expenses
Operatingprofit59,81922.3

65,900

22.7

110.2

13,861

5.2

14,5805.0

105.2

Recurringprofit14,236

5.3

14,9005.1

104.7

Net profit

9,540

3.6

9,780

3.4

102.5
20

7. FYE 5/2019 Forecasts (Consolidated)■ Changes in investment value■ Changes in dividends

investment value (hundred million yen)

Changes in dividends per share (yen)1404012012030778060

3197100

345652FYE05/2015

FYE05/2016

36272220401020

FYE05/2017

FYE05/2018

FYE05/2019（ Planlan ）FYE
05/2015

FYE05/2016

FYE
05/2017FYE
05/2018

FYE05/2019（Plan ）

21