Financial Results for FYE May 2020
July 17, 2020
The earnings forecasts in this document are based on the business environment as of the time of writing. Actual
results may differ from projections due to a variety of factors. Note also that inquiries should be submitted inJapanese.
Inquiries: Hironori Abe or Shinsuke Tamura (hdinfo@create-sd.co.jp),Corporate Planning Office1

Impact of COVID-19
1. Trends in Demand
2. Impact on Operations and Store Openings
3. Actions Taken for Employees and Support for Regional Hospitals

FYE May 2020 Results
1. Statement of Income 2. Balance Sheet3. Store Openings/Closings 4. New Format Stores
5. Cashless Transactions 6. Performance Highlights
7. Dividends

FYE May 2021 Plan
1. New Store Openings/Renovation of Existing Stores
2. Peri-/Post-COVID-19 Sales Measures
3. Productivity Improvement 4. Enhanced Professionalism
5. Targets for Consolidated Performance for FYE May 20212

Impact of COVID-193

1. Trends in Demand■Drug stores

Positivefactors

Negativefactors

Product demand

Location・Products related to preventing infection(masks, disinfectant products, hand soap)
・Food and other shut-in products
・Surging demand from hearsay, etc. (paperproducts, women’s products, etc.)

Suburban type
Residential area

・Cosmetics directly sold by manufacturers toconsumers, makeup products
・Sunscreen, etc. (due to consumers
voluntarily staying at home)

Urban type/In front ofstation
Shopping center
tenants
Demand from inboundtourism■Prescription drug stores
・ Number of prescriptions down due to fewer outpatient exams especially for acute illnesses
On the other hand, prescription unit prices up due mainly to lengthening of prescription periods
・ Instructions for taking prescription drugs given by phone (promotion of “0410 response”)
4

2. Impact on Operations and Store Openings■Store operations
・Shortening of operating hours(1) April 8 onward: Almost all stores closed at 8 p.m. (9 p.m. beginning on June 1)(2) May 11 onward: Some prescription drug stores shortened operating hours andadded non-business days — 72 stores (back to normal as ofJuly 1)・Stores inside shopping centers closed due to whole building closures — 2 stores
・Sales promotions (such as special point accumulation days) voluntarily suspended
to avoid “three Cs” (closed spaces, crowded places, and close-contact settings)
・Although the number of users and visits declined at day service centers andnursing homes, operations continued while implementing measures to prevent
infection■Impact on store openings
・New store openings and renovations delayed — 4 store openings delayed(due to difficulty securing materials and personnel)
・Delay in drug store openings and renovations also impacted in-store
prescription drug store openings — 2 stores5

3. Actions Taken for Employees and Support for
Regional Hospitals■ Actions taken for employees
・ To prevent spread of infection at stores/drug stores:(1) Distribution of masks to employees(2) Measures to prevent infection at registers anddispensing counters
Sneeze guards, no direct passing of cash or cards,
spacing in register waiting lines, preparation of faceshields and gloves(3) Distribution, use, and installation of disinfectant
dispensers
・ Payment of service and appreciation bonuses■ Donation of sanitary supplies to regional medical institutions
・ Donation of high-performance masks, face shields, protective clothing, gowns,
gloves, and other sanitary supplies to prevent infection to central regional hospitalsand other medical institutions
6

FYE May 2020 Results

71. Consolidated Statement of Income for FYE May 2020
FYE May 2019Results(Millions of yen)

Share(%)

FYE May 2020 Results(Millions of yen)

Share(%)

YoYchange(%)

Vs target(%)

Net sales

286,299100.0

319,588

100.0

111.6

103.9

Gross profit

78,95327.6

88,986

27.8

112.7

104.6

SG&A expenses

64,711

22.6

71,192

22.3

110.0

101.6

Operating profit

14,241

5.0

17,793

5.6

124.9

118.9

Ordinary profit

14,623

5.1

18,210

5.7

124.5

119.0

Profit attributable toowners of parent

9,719

3.4

12,254

3.8

126.1

119.3

8

2. Consolidated Balance Sheet for FYE May 2020
(Millions of yen)

May 31, 2019

May 31, 2020

Change133,315

153,423+20,108

Current assets

75,76387,162+11,398

Non-current assets

57,551

66,261+8,70956,426

66,646+10,220

Current liabilities

50,71859,595+8,877

Non-current liabilities

5,707

7,050

+1,34376,88986,776+9,887

133,315

153,423+20,108

Total assets

Total liabilities

Total net assets
Total liabilities and net assets

93. Store Openings/Closings■Store openings/closings, etc.
・Openings: 28 drug stores (45 planned) / 23 prescription drug stores (30 planned)
・Subsidiary acquisitions: 5 food supermarkets from acquisition of Yurigaoka Sangyo

Storeopening
Subsidiaryacquisition

Kanagawa

Tokyo

Shizuoka

Chiba

Aichi

Total

Drug store

15

155228Prescriptiondrug store

17203123

Supermarket

500005Store closings: 2 drug stores (1 after completion of contract and 1 to improve management
efficiency) 1 prescription drug store (to improve management efficiency)

・Renovations: 31 drug stores⇒ Review of merchandise and sales floor composition at 24 stores, promotionof in-store pharmacies and prescription drug store opening at 7 stores
Expansion of 5 prescription drug stores103. Store Openings/Closings■Number of stores at year end

May 31,2020
No. ofStores

Kanagawa

Tokyo

Shizuoka

Chiba

Saitama

Aichi

OtherTotal

Drug stores

351

100

88

44

151611625

In-store
pharmacies
Rate of instore
pharmacies
Dedicatedprescription drugstores

12232

1812282

196

34.8%

32.0%

20.5%

27.3%

13.3%

50.0%

18.2%

31.4%

2460220034Supermarkets

50000005

Total no. ofstores

3801068846171611664

・Rate of in-store pharmacies increased, primarily in Kanagawa

114. New Format Stores■ Cremo openings: 2 stores Year end: 8 stores
Across Plaza Ichihara Sarashina Store (Chiba)

Hamamatsu Plaza Frespo Store (Shizuoka)■ Store openings in collaboration with other businesscategories: 2 stores Year end: 5 stores
Hadano Taishincho Store (Kanagawa):
4 concessionary companies

Abiko Tennodai Store (Chiba): Supermarket
perishables and daily dish departments

125. Cashless Transactions■Promote use of Osaifu Hippo
・Switchover/introduction completed at all stores by end ofAugust 2019
・Refill and payment possible using official app as ofNovember 2019

■QR code payment
・Available at all stores as of May 2020

Percentage in brackets is total cashless
payment percentage

38.7%

40.2%

42.2%

Other
Electronic money

23.1%

25.7%

Osaifu Hippo

Credit card13

6. Performance Highlights
Net sales■ Up 11.2％ YoY (Up 3.5% vs target) Up 5.1％ YoY at existing stores
・1H at existing stores: Up 2.4% YoY 2H at existing stores: Up 7.7% YoY・Prescriptions were down sharply due to drug price revisions and the spread of
COVID-19, but double-digit growth was maintained at existing stores

Surging demand ahead of
consumption tax hike
Reactionary drop after
consumption tax hike

Impact of COVID-19

Shortened hoursof operation
Voluntarysuspension ofsales promotions

14

6. Performance Highlights
Net sales
・By segment, sales were up in specialized prescription and infection-related categories
・Prescriptions were up 0.5 pts to 9.2% as a percentage of sales
FYE May 2019 Results
Net sales(millions of yen)

Medical andhealth products

Share (%)

FYE May 2020 Results
Net sales(millions of yen)

Share (%)

YoY change(%)

69,94024.6

79,856

25.3

114.2

OTC

45,30515.9

50,895

16.1

112.3

Prescriptions

24,635

8.7

28,961

9.2

117.6

Cosmetics

39,30713.8

40,823

12.9

103.9

Food products

112,93939.7

127,393

40.3

112.8

Daily products

46,25516.3

51,305

16.2

110.9

Other*

15,828

5.6

16,869

5.3

106.6

Total

284,270100.0

316,249

100.0

111.2

Anti-bacterial andsterilizing agents,
masks, and otherproducts toprevent infection

Increased
demandassociated withconsumers
staying home

Surging demandfor paper
products,
women’sproducts, etc.

* “Other” includes stationery, baby products, clothing, pet products, and gardening products.

15

6. Performance Highlights
Gross profit margin/SG&A ratio■Gross profit margin: 28.0％

Up 0.2 pts YoY Up 0.2 pts vs target

・Prescriptions were up as a percentage of sales
・Gross profit margin improved with voluntary suspension of sales promotions
・Gross profit margin improved with increase in sales of products to prevent infection■SG&A ratio: 22.7％

Down 0.4 pts YoY Down 0.6 pts vs target

Personnel expense ratio: 11.9％ 0.0 pts YoY Down 0.1 pts vs target
Other expense ratio: 10.8％

Down 0.3 pts YoY Down 0.4 pts vs target

・Fixed expense burden reduced by increased sales
・Electric charges reduced by reviewing contracts

16

6. Performance Highlights
Dispensing department
・Prescriptions were down due to two drug price revisions and the spread of
COVID-19, but double-digit growth was maintained
Sales at all stores: Up 17.6% YoY Sales at existing stores: Up 12.8% YoY

Sales at all stores(millions of yen)

No. of prescriptions(thousands)

Prescription unit price(yen)Gross profit margin atall stores (%)
Sales at existing
stores (millions of yen)
No. of prescriptions(thousands)

Prescription unit price(yen)FYE May 2019
Full-year
results

FYE May2020
1H results

YoYchange(%)

FYE May2020
2H results

YoYchange(%)

FYE May 2020
Full-year
results

YoYchange(%)

24,635

13,824120.8

15,137114.8

28,961

117.6

2,799

1,531

116.1

1,541

104.1

3,072

109.8

8,668

8,891

104.1

9,670

110.1

9,282

107.1

40.9

40.7

-0.0

41.2

+0.2

41.0

+0.1

24,55013,226115.9

14,477110.2

27,704

112.8

2,787

1,450

110.5

1,460

99.1

2,911

104.4

8,673

8,983

105.1

9,767

111.2

9,376

108.1

17

6. Performance Highlights
Dispensing department■Expansion of home-based dispensing services
・No. of stores offering home-based dispensing services atyear end: 135 stores (up 13 from previous year)
・No. of at-home patients supported: 3,432 people (May 2020
results, up 79 from previous year)■ Premiums for Local Support
System・No. of stores with premiums at year end:
76 stores (up 5 from previous year)(Stores)No. of stores at year end
No. of stores at year end

208■ Premiums for Generics
Dispensing System
・Pct. of stores with premiums at year end:
85.7% (up 10.2 pts from previous year)
・Rate of generics use: 80.7% (up 2.2 pts fromprevious year)

230

85.7%
75.5%

18

6. Performance Highlights
Dispensing department■“Family pharmacist” initiative
・Shift of focus from objects to people
・No. of “family pharmacists” with track records: 90 (up 52 fromprevious year)■Initiative to shift to online operations
・Medicinal e-pocketbook app with prescription transmission function⇒ Introduction at all pharmacies and partnership with official
smartphone app
・Online instructions for taking prescription drugs in specific districtsin Chiba⇒ Registration at four pharmacies in specific districts(preparations for future increase in demand)
・Instructions for taking prescription drugs given by phone (promotionof “0410 response”)⇒ Giving of instructions by phone recognized as temporary
extraordinary measure for preventing spread of COVID-1919

7. Dividends(Yen)(Planned)

Initial target
38 yen・Continuous increase of dividend per share Up 2 yen vs target in FYE May 2020 andup 4 yen from previous year to 40 yen20

FYE May 2021 Plan21

1. New Store Openings/Renovation of Existing Stores
Drug stores■Drug stores: 43 stores
・Pursuit of dominance in existing areas
・Collaboration with different business categories

May 31, 2020
No. of Stores■Prescription drug stores: 35 stores
・Increase rate of in-store pharmacies to 50% at anearly stage
・Store openings in collaboration with regional
medical institutions
・Store openings leveraging drug stores’ ability toattract customers

FYE May 2021
No. of store
openings(Plan)■Renovations: 25 stores
・Retail space allocations that are suitable forlocations and in line with regional needs
・In-store prescription drug stores・Collaboration with different business categories in
conjunction with renovations and increased floor
area・Format change at Yuri Store supermarket

May 31, 2021
No. of Stores(Plan)

625

In-store
pharmacies

196

Rate of in-store
pharmacies

31.4%

Dedicatedprescription drugstores

34

All stores

659

Drug stores

43

In-store
pharmacies
Dedicatedprescription drugstores

34
1All stores

44

Drug stores

665

In-store
pharmacies

229

Rate of in-store
pharmacies

34.4%

Dedicatedprescription drugstores

35

All stores

700

Notes: 1. Planned drug store closings: 3 stores
2. Planned in-store pharmacy closings: 1 store

22

2. Peri-/Post-COVID-19 Sales Measures
Changes・Lowering of prices ・Prevention of “three Cs” (in sales promotions)・Non-contact (cashless)■Strengthening of EDLP and PB
・Price of around 200 items lowered starting in July
・Level out sales by switching from sales promotions that attract customers on
specific days to the every day low price (EDLP) scheme
・Develop and introduce low-priced private brand (PB) products■Promotion of shift to digital・Reduce contact and time waiting at registers by promoting use of Osaifu Hippo
・Utilize official smartphone app⇒ Deliver information in one-to-one marketing
・Utilize prescription transmission app⇒ Reduce prescription waiting time by sending prescriptions in advance23

3. Productivity Improvement■Drug stores
・Increase accuracy of assisted orders with better demand prediction utilizing AI
・Expand introduction of semi-self-checkout registers at stores■Prescription drug stores
・Introduction of dispensing equipment
・Promote active roles for medical assistants (support for “0402 notifications”)⇒ Shift pharmacists’ roles to more people-focused work, such as follow-up during
prescription period, by allowing medical assistants to handle object-oriented work
(preparation of drugs, etc.)■Partial introduction of telecommuting
・Shift to online meetings and training
・Shift to online hiring (explanatory meetings/interviews)

24

4. Enhanced Professionalism■Health care/dispensing promotion・Achieve 50% rate of in-store pharmacies quickly
・Promote active role of nutritionists⇒ Train nutritionists as health care staff■Expansion of pharmacies partnered with regional
medical institutions
・Train “family pharmacists” – No. of “family pharmacists”: 90 ⇒ 120
・Expand support for at home treatment – No. of stores offering the services:
135 ⇒ 142
・Expand premiums for local support system – No. of stores with premiums:
76 ⇒ 110■Initiative to shift to online instructions for taking
prescription drugs
・Develop system and operations in anticipation of normalization after
temporary measures to address COVID-1925

5. Targets for Consolidated Performance for FYE May 2021
Impact of COVID-19 is expected to remain (even if decreasing) through 1H(November 2020).
FYE May 2020

FYE May 2021

(Results)(Targets)(Millions of yen)

Share
(%)

(Millions of yen)

Share

YoY change

(%)

(%)

Net sales

319,588100.0

333,700

100.0

104.4

Gross profit

88,98627.8

92,160

27.6

103.6

SG&A expenses

71,19222.3

75,640

22.7

106.2

Operating profit

17,793

5.6

16,5205.0

92.8

Ordinary profit

18,2105.7

16,9305.1

93.0

Profit attributableto owners of parent

12,254

3.8

11,290

3.4

92.1

26