Financial Results for Q2 of FYE May 2022

(June 1, 2021 to November 30, 2021)
January 13, 2022

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 Ryota Kimura (hdinfo@create-sd.co.jp), Corporate Planning Office.

1

Consolidated Results for H1 of FYE May 2022
1. Statement of Income
2. Balance Sheet
3. Store Openings/Closings (Non-Consolidated)
4. Performance Highlights (Non-Consolidated)

Initiatives in H2 of FYE May 2022
1. New Store Openings/Renovation of Existing Stores
2. Response to Lifestyle Changes
3. Response to Prescription Demand in Super Aging Society
4. Initiatives for Curbing SG&A
5. Improvement of Customer/Patient Experience Using IT andPhysical Stores
6. Promotion of Sustainable Management
7. FYE May 2022 Full-Year Plan (Consolidated)2

Consolidated Results for H1 ofFYE May 2022

3

1. Consolidated Statement of Income for H1 of FYE May 2022
FYE May 2021
H1 Results(Millions ofyen)[Reference] Estimates Basedon Old Standard
FYE May 2022 H1 Results

FYE May 2022
H1 Results

Share(%)(Millions ofyen)

Share(%)

YoYchangeVsplan(%)(%)(Millions ofyen)

Share(%)

YoYchange(%)

Net sales

168,671

100.0

173,823

100.0

103.1

99.8

175,675

100.0

104.2

Gross profit

46,40727.5

46,968

27.0

101.2

100.6

48,588

27.7

104.7

SG&A expenses

36,72421.8

38,125

21.9

103.8

100.6

39,775

22.6

108.3

Operating profit

9,683

5.7

8,843

5.1

91.3

100.6

8,813

5.0

91.0

Ordinary profit

9,907

5.9

9,088

5.291.7

101.0

9,058

5.2

91.5

Profit attributableto owners ofparent

6,731

4.0

6,167

3.5

91.6

101.3

6,137

3.5

91.2

4

2. Consolidated Balance Sheet for H1 of FYE May 2022
May 31, 2021

Nov. 30, 2021

Total assets
163,824

Total assets
168,900+5,075(Millions of yen)

■ Current assets +1,839
Increase in accounts receivable
Increase in products

Total
Current liabilities
assets
67,18691,084Current
assets92,924■ Non-current assets +3,235

67,495

Property, plant and equipment+309

Intangible assets

72,740Total netassets
96,63875,975+3,235+1,500–43■ Total liabilities +309
Accrued expenses

Noncurrent
assets+1,552

Totalliabilities+1,839Noncurrent
assets+512

Total net
assets101,404+4,765+430

Liabilities related to retirement benefits+178
Accounts payable–233■ Total net assets +4,765
Retained earnings+4,7615

3. Store Openings/Closings (Non-Consolidated)■ Store openings/closings and renovations
No. of store openings in FYEMay 2022 H1Storeopening

Closings: 1 drug store (contract completed),
1 dedicated prescription drug store (contract completed)

Kanagawa

Tokyo

Chiba

Aichi

SaitamaShizuoka

Total

Drug stores

93002014

Prescription drug
stores145210123

・Renovations: 19 stores (fresh foods enhancement: 4 stores, pharmacy expansion: 1 store, etc.)■ No. of stores as of Nov. 30, 2021
No. of stores as ofNov. 30, 2021

Kanagawa

Tokyo

Shizuoka

Chiba

Aichi

OtherTotal

Drug stores

382

108

88

47

1830

672

In-store
pharmacies
Rate of in-store
pharmacies
Dedicatedprescription drug
stores15640

191796247

40.8%

37.0%

21.6%

36.2%

50.0%

20.0%

36.8%

277020137Supermarkets

5000005Total no. of stores

414

115

8849

1831714
6

3. Store Openings/Closings (Non-Consolidated)Fresh foods enhancement Collaboration with regional
medical institutions● Isehara-Sakuradai store(Isehara City, Kanagawa)

・Enhancement of food lineup including
not only processed foods but fresh
foods as well
⇒Open as drug store with fresh foods
at former site of supermarket,
providing quick, one-stop shopping
experience● Hazawa Yokohama-Kokudai
Ekimae store(Yokohama City, Kanagawa)・In-store prescription drug store withfour medical departments of medical
institution on 2nd floor⇒Develop stores combined withmedical institutions as part of newstation development
7

4. Performance Highlights (Non-Consolidated)
Although there was a reactionary drop from COVID-19-related demand for antiviral and stay-at-home products in the previous year, performance is strong
compared to before the COVID-19 pandemic.

■ YoY net sales comparison at existing stores (H1): 98.8%└ OTC: 97.8%, Prescriptions: 109.1%
YoY Trend in Net Sales at All Existing Stores (Quarterly)+8.0

FYE May 2021

FYE May 2022

+6.7+6.0+4.0+1.6+2.0‐0.8+0.0-2.0‐0.9-4.0

Reactionary dropfollowing COVID19-related demand-6.0-8.0

1Q

Reactionary drop following
COVID-19-related demand‐1.4

Nov. 2021
Promotional flyers not
distributed at all stores
2Q‐5.93Q

4Q

8

4. Performance Highlights (Non-Consolidated)■ Net sales —Net sales by segment —・Prescriptions as a percentage of sales up from 9.2% to 10.1% (up 0.9 pts from previous year)
・Reactionary drop following previous year’s COVID-19-related demand for anti-viral products,
slump in sales of drugs for common cold・Foodstuffs performed well despite lessened impact of stay-at-home demand
FYE May 2021

FYE May 2022

H1 Results

H1 Results

Net sales(millions of yen)

Share (%)

Net sales(millions of yen)

Share(%)[Reference] Estimates Basedon Old Standard
FYE May 2022 H1 Results
YoYchange(%)

Net sales(millions of yen)

Share(%)

YoYchange(%)

44,44626.9

45,729

26.8

102.9

46,028

26.7

103.6

OTC

29,22817.728,258

16.6

96.7

28,556

16.6

97.7

Prescriptions

15,2189.2

17,471

10.2

114.8

17,471

10.1

114.8

Cosmetics

20,43712.4

20,907

12.3

102.3

21,128

12.2

103.4

Food products

64,70739.1

67,795

39.7

104.8

68,612

39.8

106.0

Daily products

27,511

16.6

27,797

16.3

101.0

28,090

16.3

102.1

Other*

8,333

5.0

8,324

4.9

99.9

8,545

5.0

102.5

Total

165,437

100.0

170,553

100.0

103.1

172,405

100.0

104.2

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

94. Performance Highlights (Non-Consolidated)■ Gross profit margin/SG&A ratio (based on old standard)
Gross profit margin: 27.87% Up 0.17 pts YoY Up 0.26 pts vs target(Boosting factor) Increase in prescriptions as percentage of sales
Voluntary refraining from distributing promotional flyers at all stores

SG&A ratio: 23.12% Up 0.90 pts YoY Up 0.35 pts vs target
・ Personnel expense ratio: 12.45% Up 0.63 pts YoY Up 0.24 pts vs target(Increasing factor) Increased hiring of pharmacists to support opening of prescription drug stores
Decrease in turnover from previous year

・ Other expense ratio: 10.66% Up 0.26 pts YoY Up 0.10 pts vs target(Increasing factor) Increase in commissions in conjunction with increase in cashlesstransactions
Increase in utility expenses associated with sharp rise in fuel prices
Increase in depreciation and amortization associated with capital investment

10

4. Performance Highlights (Non-Consolidated)
On the rebound from fewer exams and longer-term prescriptions in previous
year, number of prescriptions up, but unit prices down. Net sales strong atexisting prescription drug stores.

■ Dispensing department —Net sales/No. of prescriptions/prescription unit price—FYE May 2021
H1 Results

FYE May 2022
H1 Results

YoY change(%)

15,21817,471114.8%

No. of prescriptions (thousands)

1,572

1,847

117.5%

Prescription unit price (yen)

9,523

9,302

97.7%

15,151

16,527109.1%

No. of prescriptions (thousands)

1,564

1,734

110.8%

Prescription unit price (yen)

9,533

9,391

98.5%

Home-based dispensing sales (millions of yen)

698

670

96.0%

No. of stores offering home-based dispensing services

152154+2464598.8%

43.143.6+0.5 pts

Sales at all stores (millions of yen)

Sales at existing stores (millions of yen)

No. of prescriptions (thousands)

Gross profit margin at all stores (%)

11

Initiatives in H2 of FYE May 2022121. New Store Openings/Renovation of Existing Stores
Number of prescription drug store openings expected to exceed target(record high number)
Expected H2 closings: 2 drug stores (contract completed, S&B)
Expected full-year closings: 3 drug stores (contract completed, S&B),
1 dedicated prescription drug store(contract completed)■ Store openings/closingsin H2 (Forecast as of Nov.
30, 2021)
・Drug stores: 20 stores(Full-year forecast: 34 stores)
・Prescription drug stores: 30 stores(Full-year forecast: 53 stores)

May 31, 2022
Forecast of No.
of stores(Reference)FYE May 2021
No. of stores

659

29690
276

36.8%

—

40.0%

34.3%

Dedicated prescription
drug stores

37

136

Supermarkets

50

All stores

714—

385733

Nov. 30, 2021
No. of stores

FYE May 2022
H2 forecast

Drug stores672

20 (2 closings)

In-store pharmacies

247

Rate of in-storepharmacies■ Renovations in H22265700● Enhancement of fresh foods and shift to in-store
prescription drug stores・Renovations planned for H2: 14 stores (full-year: 33 stores)
Addition projects: 2 stores→Enhancement of food lineup and shift to in-store prescription drug stores

Pharmacy expansion: 4 stores
Fresh foods enhancement: 3 stores, etc.

13

2. Response to Lifestyle Changes

Achieving quick, one-stop shopping● Expansion of fresh, frozen, and instant ● New product acceptance service
food products・Installation of Cookpad Mart lockers
・Further expansion and review of lineup→Ensure convenience with one-stop shopping・New development and revamping of private
brand (PB) products・Continued expansion of food sales floor at
new stores→Supplementation of items missing at smallerstores
Expected No. of stores by year-end: 18 stores
・Promotion of installation of delivery
acceptance lockers→Expected No. of stores by year-end: 56 stores

14

3. Response to Prescription Demand in Super Aging Society

Further expansion of prescription business● Working toward in-store pharmacy rateof 50%└Prescription drug store openings
planned this year: 53 stores(Rate of in-store pharmacies at year-end: Over 40%)・Enhancement of pharmacist education
・Increased hiring of medical assistants
・Improvement of patient satisfaction→Enhancement of customer service at prescription
drug stores→Elimination of unmet demand and reduction ofwaiting times

400

・Promotion of follow-up for patient compliance→Establishment of system for providing online instructions
for taking prescriptions
・Establishment of aseptic preparation facilities anddevelopment of joint-use operations→Expected No. of aseptic dispensaries by year-end:
6 storesIn-store prescription drug stores
OTC drug stores

Stores800600● Promotion of certification as pharmacies
partnered with regional medical institutions

Rate of in-store
pharmacies atyear-end

40%

200

Rate of in-store
pharmacies

0
FYE May
2021

FYE May2022

FYE May2023

Target:50%
FYE May2024

15

4. Initiatives for Curbing SG&A

Productivity
improvement

Promotion of cashlesstransactions

・Expanded introduction of semi-selfcheckout registers→Expected No. of stores by year-end: 61 stores・Curbing of commissions→Enhancement of sales promotions toencourage use of our electronic money

・Use of tablets→Implementation of online training andpreparation of video manual (register
operations, prescription procedures, etc.)

Transactions using a transit IC card or QR code
Transactions using a credit card(%)

Transactions using our electronic money

60

・Promotion of active roles for medicalassistants→Expansion of picking/sorting training,accompaniment on home visits, andoperational support

50・Control of man-hours→Calculate standard man-hours and personnel
at each store, aiming to operate withappropriate number of personnel

1040

Total
33.10

30

3.01

20

18.85

Total
41.56
5.61
18.54

11.24

Total
48.12
10.04
17.84

17.41

20.24

Nov. 2020

Nov. 2021

0Nov. 2019

Note: Although credit card transactions have decreased, othercashless transactions such as with QR codes have increased.
Transactions using our electronic money are holding strong.

16

5. Improvement of Customer/Patient Experience Using ITand Physical Stores

Provide customers and patients with a new experience●Promotion of digital marketing●Verification of new services

・Update official smartphone app
・Verification of mobile pre-order services(Planned for March 2022)
REMO CART→Delivery of individualized coupons and addition→Product can be picked up at store on sameand expansion of new functions such as thoseday by placing order on smartphone aheadpertaining to health dataof time (Verification and introduction startingin March 2022)●Promotion of retail media business・Delivery of manufacturer ads on in-store
digital signage
・Delivery of targeted social media ads byutilizing in-store beacons176. Promotion of Sustainable Management
Aiming to achieve both sustainable improvement ofcorporate value and realization of a sustainable society●Enhancement of ESG information disclosure
・Disclosure of information on website:
https://www.createsdhd.co.jp/ (in Japanese only)

E: Environmental conservation initiatives→Continued ISO 14001 certification, investment in green bonds issued by Kanagawa
Prefecture, etc.

S: Social contribution activities→Promotion of family pharmacies, conclusion of disaster cooperation agreements withcommunities, donation activities, etc.

G: Corporate governance and risk management system→Compliance system, internal whistleblower system, information security policy, etc.

●Establishment of Sustainability Promotion Committee
・Establishment of basic sustainability policy and identification of material
issues (materiality)
・Establishment of plan for initiatives to resolve social issues and managementof progress18

7. FYE May 2022 Full-Year Plan (Consolidated)
Note: The full-year plan has not been revised.

Full YearFYE May 2021
Cumulative(Millions of yen)

Share

[Reference for FYE
May 2022]
Estimates Based on
Old Standard

FYE May 2022
PlanShare(%)(Millions ofyen)(%)

YoYchange(Millions ofyen)(%)

YoYchange(%)

Net sales

338,476

100.0

352,600

100.0

104.2

355,490

105.0

Gross profit

93,365

27.6

95,880

27.2

102.7

98,760105.8

SG&A expenses

74,73522.1

76,500

21.7

102.4

79,380106.2

Operating profit

18,6295.5

19,3805.5

104.0

19,380104.0

Ordinary profit

19,061

5.6

19,8005.6

103.9

19,800103.9

Profit attributable toowners of parent

12,376

3.7

12,770

3.6

103.2

12,770103.219