Financial Results for Q2 of FYE May 2020
(June 1, 2019 to November 30, 2019)
January 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 Office.

1

SDGｓ Initiatives
1. Environmentally Conscious Corporate Activities
2. Sustainable Management and Store Opening Strategy
3. Contribution to the Community

Consolidated Results for H1 of FYE May 2020
1. Statement of Income 2. Balance Sheet
3. New Store Openings 4. Renovation of Existing Stores
5. Performance Highlights 6. Topics
7. Statement of Income (Create SD)

Initiatives in H2 of FYE May 2020
1. New Store Openings 2. Revitalization of Existing Stores
3. Digital Sales Measures 4. Productivity Improvement
5. Prescription Drug Store Initiatives
6. Targets for Consolidated Performance for FYE May 20202

SDGｓ Initiatives

3

SDGｓ Initiatives
1. Environmentally Conscious Corporate Activities■Ongoing acquisition of ISO 14001 certification=> Ongoing acquisition of ISO 14001 certification atall stores since 2001
・Reduction of waste (Eco-cap Campaign, cardboard recycling)・Efficient use of resources (reduction of plastic bags, energy-saving airconditioning, efficient lighting)・Consideration for surrounding area (noise, exhaust, etc.)

2. Sustainable Management and Store Opening Strategy■Only 18 stores have closed due to business slump since founding
36 years ago
・Strict criteria for store openings
・Proposals of product lineups and store layouts matching location and scale
・Efficient management based on dominance4

SDGｓ Initiatives
3. Contribution to the Community■Signing of disaster agreements withmunicipalities=> Provision of supplies (products)
during times of disaster
As of January 2020
Signed with 17 cities, 8 towns, 1 village, and2 neighborhood associations■Promotion of healthy lifestyles and welfare for local residents=> Health consultations, healthy working events, hands-on
pharmacist experience for children, etc.

5Consolidated Results for
H1 of FYE May 20206

1. Consolidated Statement of Income for H1 of FYE May 2020
FYE May 2019
H1 Results(Millions of yen)FYE May 2020
H1 ResultsShare(%)(Millions of yen)

Share(%)

YoYchange(%)

Vs plan(%)

Net sales

140,728100.0

153,305

100.0

108.9

101.2

Gross profit

38,661

27.5

42,027

27.4

108.7

101.5

SG&A expenses

31,981

22.7

34,985

22.8

109.4

100.5

Operating profit

6,680

4.7

7,041

4.6

105.4

107.2

Ordinary profit

6,873

4.9

7,219

4.7

105.0

107.3

Profit attributable toowners of parent

4,667

3.3

4,912

3.2

105.3

105.9

7

2. Consolidated Balance Sheet for H1 of FYE May 2020
(Millions of yen)

May 31, 2019Nov. 30, 2019

Change133,315

138,322+5,006Current assets

75,76378,502+2,739

Non-current assets

57,551

59,819+2,26756,426

57,620+1,193Current liabilities

50,71851,656+937

Non-current liabilities

5,707

5,963+256

76,88980,702+3,813

133,315

138,322+5,006

Total assets

Total liabilities

Total net assets
Total liabilities and net assets

8

3. New Store Openings■OTC: 15 stores / Prescription drug stores: 5 stores
FYE MayOTC
2020
In-store
No. of store
pharmacies
openings

Kanagawa

Tokyo

Shizuoka

Chiba

OtherTotal

91131

15200215Store closures: 1 OTC store

・Continued to deepen dominant store openings(to improve management efficiency)
・New format store openings => Cremo 2 stores・Opened 5 prescription drug stores in H1 due to pharmacist OTC training period

OTC

Nov. 30, 2019
No. of StoresIn-store
pharmacies
Rate of in-store
pharmacies

Dedicatedprescription
drug stores
Total no. ofstores

Kanagawa

Tokyo

Shizuoka

Chiba

OtherTotal

346

100

84

4241613108

30181112179

31.2

30.0

21.4

26.2

29.3

29.2

24

6022

34370

106

84

44

43647
93. New Store Openings■Cremo openings: 2 stores
Chiba: Across Plaza Ichihara Sarashina Store

Shizuoka: Hamamatsu Plaza Frespo Store

4. Renovation of Existing Stores■Renovations: 21 stores
・OTC: 17 stores・Prescription drug stores: 4 stores=> (1) Improvement of health & beauty productdepartments(2) Review of merchandise and retail space
allocations(3) In-store prescription drug stores=> Expansion of dispensing rooms andcustomer waiting spaces in response toincrease in number of prescriptions

105. Performance Highlights
Net sales■Up 8.9% YoY (up 2.4% at existing stores)・ Sales of seasonal products slumped in June and July due to poor weather and low
temperatures
・ Measures to address special demand ahead of tax hike were successful in significantly
increasing sales in September, and the reactionary decline was limited
・ Osaifu Hippo point card with e-money functionality was introduced at all stores in AugustComparison with Last Consumption Tax Hike (YoY Change at Existing Stores)(%)

FYE May 2020
Last consumption tax hike(FYE May 2014)

Aug.: Osaifu Hippo point card withe-money functionality introducedat all storesSep.-Nov.: Surge demandahead of tax hike andreactionary decline

June-July: Slump in sales of seasonal

Sep.-Oct.: Impact oftyphoons and heavy rains

products due to poor weather

4 months earlier

3 months earlier

2 months earlier

1 month earlier

Tax hike

1 month later11

5. Performance Highlights
Net sales
・Prescriptions up 20.8% compared to previous year and medical and health product shareup 0.5 pts
FYE May 2019
H1 Results
Net sales(millions of yen)

Medical and health products

FYE May 2020
H1 Results

Share (%)

Net sales(millions of yen)

Share (%)

YoY change (%)

33,061

23.7

36,811

24.2

111.3

OTC

21,612

15.5

22,986

15.1

106.4

Prescriptions

11,448

8.2

13,8249.1

120.8

Cosmetics

19,79914.2

20,780

13.7

105.0

Food products

55,94240.0

60,947

40.0

108.9

Daily products

23,185

16.6

25,399

16.7

109.5

Other*

7,735

5.5

8,289

5.4

107.2

Total

139,725100.0

152,227

100.0

108.9

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

125. Performance Highlights
Gross profit margin■Gross profit margin: 27.6% Down 0.1 pts YoY
・Cost of food products such as milk products and ice cream went up in early spring・Sales of seasonal products slumped

SG&A ratio■SG&A ratio: 23.29% Up 0.10 pts YoY
・Personnel expense ratio: 12.14% Up 0.12 pts YoY
・Other expense ratio: 11.15% Down 0.02 pts YoY
Factors behind YoY increase in personnel expense ratio
・Increase in unit cost of personnel expenses (employee salary increases/higher salary at hiring)
Factors behind YoY decrease in other expense ratio
・Utility expenses: Lower basic rate with contract change
Rainy season ended a month later than previous year, and temperatures
were also lower

135. Performance Highlights
Dispensing department
・Number of prescriptions trending favorably, up 16.1% while net sales up 20.8%
・Some time has passed since NHI medical fee/drug price revisions in April 2018, and grossmargin has recoveredFYE May 2019
H1 Results

FYE May 2020

11,44813,824120.8%

No. of prescriptions (thousands)

1,319

1,531

116.1%

Prescription unit price (yen)

8,540

8,891

104.1%

11,407

13,227115.9%

No. of prescriptions (thousands)

1,313

1,450

110.5%

Prescription unit price (yen)

8,547

8,983

105.1%

609

688

113.1%

122132+104045111.5%

40.7

40.7-0.0 pts

Sales of prescriptions at all stores (millions of yen)

Sales at existing stores (millions of yen)

Sales of home care services (millions of yen)
No. of stores
No. of prescriptions (thousands)

Gross margin on prescriptions at all stores (%)

H1 Results

YoY
Change14

5. Performance Highlights
Dispensing department■Premiums for Local Support
SystemNov. 30, 2018

Nov. 30, 2019・No. of stores with premiums: 67 stores(up 10 from previous year)
35 pts0 pts

35 pts0 pts

22 pts18 pts■Premiums for Generics Dispensing System
・Premium III: 85% or more: 44 stores(up 23 from previous year)

Nov. 30, 2018

Nov. 30, 2019・Premium II: 80% or more: 74 stores(up 20 from previous year)
・Premium I: 75% or more: 63 stores(up 7 from previous year)
・No premium: 32 stores(down 25 from previous year)

26 pts

22 pts18 pts0 pts

26 pts

0 pts

Generics usage rate: 79.50% (up 2.36 pts from previous year)(Market: 76.9%)

15

5. Performance Highlights
Dispensing department■Human resources development and improvement of environment(2) Construction of home
(1) Expansion of dispensing
service training center
training center・ Increase in number of trainees
・ Address relaxation of regulations on
dispensing work
Roughly double thenumber of trainees

Recreate actual
dispensing rooms

・Utilize as base for on-the-job training
・Change home service training curriculum
Recreate individualrooms

Use practicaltraining model■Improvement of work with introduction of dispensing equipment
・Fully automated powdered medicine packaging machine ・Fully automated liquid medicine
dispensing machine ・Fully automated tablet packaging machine ・Picking machine, etc.
16

6. Topics
New construction of in-house distribution center (DC) inChigasaki City, Kanagawa (operational since September 2019)■ Land and building owned, operations outsourced to distribution company
・Serves approx. 130 stores in southwestern Kanagawa => Improved delivery efficiency
・Improve food product inventory function (DC function) => Shortening of supply chain・Introduction of latest equipment (case sorter, conveyor system, etc.) => Improved efficiency of workinside DC
・Installation of solar panels on roof => Consideration of environment by reducing CO2
emissions177. Statement of Income for H1 of FYE May 2020 (Create SD)
FYE May 2020
H1 Results

FYE May 2019
H1 Results(Millions of yen)

Share(%)(Millions of yen)

Share(%)

YoY change(%)

Vs plan(%)

Net sales

139,725100.0

152,227

100.0

108.9

101.2

Gross profit

38,65827.7

41,968

27.6

108.6

101.4

SG&A expenses

32,40023.2

35,452

23.3

109.4

100.4

Operating profit

6,257

4.5

6,515

4.3

104.1

107.1

Ordinary profit

6,444

4.66,685

4.4103.8

107.1

Net profit

4,381

3.1

4,545

3.0

103.7

105.5

18

Initiatives in H2 of FYE May 202019

1. New Store Openings■OTC H2 forecast: 20 stores・Continue pursuit of dominance in existing areas
without relaxing store opening criteria
・Store openings in collaboration with other businesscategories => H2 plan: 2 stores■Prescription drug store H2forecast: 25 stores
Ratio of in-store pharmacies at year end: 32.1%
・Store openings in collaboration with regional medicalinstitutions=> Store openings in collaboration with clinics
・Stores handling prescriptions on a widespread basis
using OTC stores’ ability to attract customers=> Promote store openings within existing OTC stores
having strong abilities to attract customers

OTC
May 31, 2019
No. of StoresIn-store pharmacies

173

Rate of in-store
pharmacies

28.9%

Dedicated prescription
drug stores

35

All stores

634

OTC
FYE May2020
In-store pharmacies
No. of store Dedicated prescription
openings
drug stores(Forecast)

May 31, 2020
No. of Stores(Forecast)

599

3530―All stores

35OTC

632

In-store pharmacies

203

Rate of in-store
pharmacies

32.1%

Dedicated prescription
drug stores

34All stores

666

Notes: 1. 2 OTC stores to be closed
2. 1 prescription drug store to be closed

20

2. Revitalization of Existing Stores■Renovation—H2 forecast: 20 stores (Full-year forecast: 41 stores, 6 more than plan)
・Improve lineups at old types of stores=> Change retail space allocations and lineups to those for new stores
Retail space allocations that are suitable for locations and in line with regional needs
・Optimization of perishables sections=> Increase or decrease perishables sections flexibly depending on store locations and needs
・Establishment of in-store prescription drug stores, expansion of prescription drug stores■Improve health & beauty product sales
・Focus on sales of high margin products=> Narrow down and focus on sales of high margin products not susceptible to weather
・Strengthen sales of new private brand products=> Roll out initiatives of favorably performing stores to other stores, and tie them into increased
recognition of private brand and higher profits
・New development and revamping of private brand products21

3. Digital Sales Measures■Promote use of Osaifu Hippo
・Osaifu Hippo transaction ratio

・Monthly users

Nov. 30, 2019

Target for May 2020

13.3％
Nov. 30, 2019

20.0％
Target for May 2020

380,000(1) Acquisition of new users

Breakdown of transactions (as of Nov. 30, 2019)
Cashless transactions: 38.3%=> Provision of first time incentives for new users=> Establishment of use by having customers
experience it(2) Promotion of conversion to loyal
customers

460,000

Osaifu
Hippo

Cash
61.7％

13.3％

=> Provision of incentives for topping up large amount=> Reduction of cash register work load by increasing
amounts of individual charges

Credit card
QR codeElectronic money

0.1％

3.0％

21.9％

22

3. Digital Sales Measures■Utilization of official smartphone app
・ No. of downloads as of Nov. 30, 2019: 620,000 (achieved initial target of460,000 downloads)
・ Released linking function with Osaifu Hippo at end of H1=>Charges and payment can be made via smartphone app(1) Implement promotional campaigns with cooperation of manufacturers(2) Linking with medicinal e-pocketbook (prescription transmission app)23

4. Productivity Improvement■Tool-based operational improvement
・Establishment of product expiration date management system operations=> Introduced at all stores in July 2019, continuing to monitor operations at all stores
・Improvement of means of communication between stores=> Introduce mobile devices at all stores(1) Improved efficiency of information sharing between stores and with multiple stores(2) Utilization as communication tool■Man-hour management according to store environment
・Continued control of man-hours by store=> (1) Establishment and achievement of man-hour targets according to sales, store size, andstore environment(2) Thorough management of progress on man-hours by day245. Prescription Drug Store Initiatives■Human resources development
・Utilization of new training center, change of home service training curriculum=> Carry out model-based vital sign training and sterilization-related home service training
・Review of medical assistant training=> Carry out picking training in aim of attaining certain level of dispensing skills
・New introduction of customer service training for pharmacists=> Customer service training for pharmacists on things like pleasantness, cleanliness, etc.

■Productivity improvement
・Introduction of medicinal e-pocketbook (prescription transmission app) at all stores andpromotion of use=> Approach to patients and linking with official smartphone app
・Reduction of pharmacist work load=> (1) Utilization of dispensing-related equipment and development of operations(2) Promotion of active roles for medical assistants25

6. Targets for Consolidated Performance for FYE May 2020
Full-year plan has not been revised

FYE May 2019

FYE May 2020

(Results)(Targets)(Millions of yen)

Share
(%)

(Millions of yen)

Share

YoY change(%)(%)

Net sales

286,299

100.0

307,600

100.0

107.4

Gross profit

78,95327.6

85,05027.6107.7

SG&A expenses

64,711

22.6

70,080

22.8

108.3

Operating profit

14,241

5.0

14,9704.9

105.1

Ordinary profit

14,623

5.1

15,300

5.0

104.6

9,719

3.4

10,2703.3

105.7

Profit attributable toowners of parent

26