FY2019 (6/18-5/19) Interim Results Explanatory Meeting
January 18, 2019
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

1H FY 2019 Consolidated 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)

FY 2019 Efforts in the second half
1. New Store Openings
2. Renovation of Existing Stores
3. Sales Promotions
4. SG&A Expense Reduction
5. Initiatives by Prescription Drug Stores
6. FYE 5/2019 Forecasts (Consolidated)

2

1H FY 2019 Consolidated Results

3

1. Profit and Loss Statement (Consolidated)
1H FY2018(consolidated)(million yen)

Share(%)

1H FY2019(consolidated)(million yen)

Share(%)

YoY change(%)% ofprojection(%)

Net sales

130,967

100.00140,728100.00107.598.9

Gross profit

35,38427.02

38,661

27.47

109.3

99.1

SG&A expenses

29,28022.36

31,981

22.73

109.2

98.9

Operating profit

6,103

4.66

6,680

4.75

109.4

100.0

Recurring profit

6,279

4.80

6,873

4.88

109.5

100.5

Net profit

4,276

3.27

4,667

3.32

109.1

102.1

4

2. Balance Sheet (Consolidated)(million yen)
May 31, 2018(consolidated)

Total assets

121,412

November 30,2018(consolidated)

125,541

Change+4,129

Main causesof changes■Total assets
・ Increase of 584 million yen inaccounts receivable・ Increase of 695 million yen in

Current assets

71,212

71,462+250

merchandise・ Decrease of 595 million yen in
cash equivalent, etc.

Fixed assets

50,20054,079+3,878

・ Increase of 1,020 million yen inbuildings and structures
・ Increase of 2,266 million yen in

Total liabilities
Current liabilities

52,03552,547+512

47,01947,256+236

land■Total liabilities
・ Decrease of 253 million yen inaccounts payable
・ Increase of 452 million yen in

Fixed liabilities

Total net assets
Total liabilities andnet assets

5,015

69,377

5,291

72,993+275+3,616

accrued expenses
・ Increase of 102 million yen inasset retirement obligations■ Total net assets
・ Posted net income of121,412

125,541+4,1294,667 million yen
・ 1,074 million yen dividend
payment5

3. New Store Openings
 OTC: 20 store openings/Prescription drug stores: 5 store openings (in-store pharmacies: 5 stores)
Store closures OTC: 3 stores Contract expiration: 2 stores Improvement management efficiency: 1 store
Prescription drug stores: 2 stores Contract expiration: 1 store (in-store pharmacy)
Improvement management efficiency: 1 store (dedicated prescription drug store)
Kanagawa

Tokyo

Shizuoka

Chiba

OtherTotal

In-store pharmacies

324
9596
2580
16368409576
153

Rate of pharmacy
establishment in OTC stores

29.3%

26.0%

20.0%

22.2%

22.5%

26.6%

Dedicated prescription
drug stores

25602235OTCFYE May
2019 2Q
Total
numberof storesas of FYE

349
10280
3842
• Continued to deepen dominant store openings and expand openings in a range of store formats
Total number of stores611

 Cremo, large-scale stores incorporating Cremo essence, joint store openings with other types of business, small-scalestation front stores, shopping center stores, in-store type openings• Opened 5 prescription drug stores in 1H due to extension of pharmacist OTC training period starting in current
fiscal year  plan to open 20 stores in 2H

4. Renovation of Existing Stores
 OTC: 23 stores Prescription drug stores: 3 stores•••

Focus on health & beauty:
7 stores
Optimization of perishables
sections: 16 stores•

Extension of pharmacies and customer waiting space inresponse to increase in number of prescriptions: 2 storesInstallation of sterile dispensary as core store for home medicalcare market, extension of pharmacies and customer waiting
space: 1 store
65. Performance Highlights
Net Sales 107.5% vs. previous year (98.9% vs. plan), 100.1% vs. previous year for existing stores••••

Reverse effect owing to discount coupon-based sales promotion in previous June
Slump in sales of seasonal products due to adverse weather including summer heatwave andwarm winterMeasures to increase frequency of store visits through EDLP measures and focus on foodworked on since previous fiscal year bolstered sales.
Sales in Prescription Department remained strong.
(Year-on-Year Changes in Sales and No. of Customers at Existing Stores)

106.0%
Increase because of reverse effect from
impact of typhoons in previous year

104.0%
102.0%FYE 5/2018
FYE 5/2019

100.0%
98.0%
96.0%
94.0%

Decrease because of reverse effect from couponbased sales promotion in previous year

Continual rain and adverse
weather

06/2018'18/6月 07/2018'18/7月 08/2018'18/8月 09/2018'18/9月 10/2018'18/10月 11/2018'18/11月

75. Performance Highlights
Net Sales
1H FY2018
Net sales(million yen)

Medical and healthproducts

1H FY2019
Share(%)

Net sales(million yen)

Share(%)

YoY change(%)

30,68423.6

33,061

23.7

107.7

(O T C)

20,49915.8

21,612

15.5

105.4

(Prescription)

10,185

7.8

11,4488.2

112.4

Cosmetics

18,626

14.4

19,799

14.2

106.3

Food products

51,23839.4

55,942

40.0

109.2

Daily products

22,14317.0

23,185

16.6

104.7

Other

7,294

5.6

7,735

5.5

106.0

Total

129,988

100.0

139,725100.0

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

・Expert and convenient dispensing and food are drivers.

8

5. Performance Highlights
Gross Profit Ratio Gross profit ratio 27.7% +0.5% vs. previous year, +0.1% vs. plan
・Review of sales promotion measures (switch from discount coupon-based sales promotion to points-based
sales promotion to maintain frequency of store visits)
・Growth in dispensing sales share ・Streamlining of logistics ・Improvement in merchandise purchasing
・Improvement in gross profit due to renovation of existing stores

SG&A Ratio SG&A ratio 23.2%, +0.4% vs. previous year, 0.0% vs. plan
Personnel expense ratio: 12.0%, +0.2% vs. previous year, -0.2% vs. plan
Other SG&A ratio: 11.2%, +0.2% vs. previous year, +0.2% vs. plan
25

22.8

23.2

11.8

12.0

0.8
4.5

0.94.7(Personnel expense ratio factors behind increase vs. previous year)•Increase in unit costs (employee wage increases and hourly pay),increase in personnel due to increase in store openings

201510

Personnel expense(Personnel expense ratio factors behind increase vs. plan)•Review of standards for personnel allocation to match location
environment and products handled for each store, control of working hours
Working hours at existing stores 97.1% vs. previous year

Utilities expenses(Other SG&A ratio factors behind increase vs. plan)•Increase in utilities expenses due to heatwave
Expenses other than •Increase in rent expenses due to an increase in large-scale store
aforementionedopenings
Rent expenses

55.7

5.6

1H FY2018

1H FY2019095. Performance Highlights (Dispensing Department)
・Prescription drug unit prices fell due to the April NHI price revisions, but the number ofprescriptions remained strong

1H FY2018

1H FY2019

ChangeSales of prescriptions in all
stores （million yen)

10,185

11,448112.4

Number of prescriptions(1,000 cases)

1,121

1,319

117.6

Prescription drug unit
price (Yen)

8,928

8,540

95.7

10,113

10,750106.3

Number of prescriptions(1,000 cases)

1,112

1,220

109.8

Prescription drug unit
price (Yen)

8,941

8,672

97.0

Sales of home-care services(million yen)558609109.0

Number of stores(stores)

96

122+26

Number of prescriptions(1,000 cases)

3640

111.4

Gross profit ratio ofprescriptions in all stores (%)

41.3

40.7

▲0.6

Sales of existing stores(million yen)10

5. Performance Highlights (Dispensing Department)
Premiums for Local Support System
 Number of stores with local support system premiums: 57 stores (+11 storesvs. previous year)••

Expansion of home-care service stores: 122 stores (+26 stores vs. previous year)⇒Expansion in home medical care site to 3 stores
Implementation of health consultations: 130 stores (+22 stores vs. previous year)⇒Expansion of number of stores implementing health consultations as added function offamily pharmacy

Premiums for Generics Dispensing System
 Generics usage rate: 77.15% (+4.06% vs. end of previous year) *Market: 73.2%• Aimed to increase premiums, maintained improvement in usage rate
Premium III:
Premium II:
Premium I:
No premium:

85% 80% 75% -21 stores (+13 stores vs. end of previous year)
54 stores (+12 stores vs. end of previous year)
56 stores (-6 stores vs. end of previous year)
57 stores (-16 stores vs. end of previous year)

116. Profit and Loss Statement (Create SD)
1H FY2018(million yen)

1H FY2019

Share(%)(million yen)

Share(%)

YoY change(%)% ofprojection(%)

Net sales

129,988

100.0

139,725

100.0

107.5

98.9

Gross profit

35,34027.2

38,658

27.7

109.4

99.1

SG&A expenses

29,65822.8

32,400

23.2

109.2

99.0

Operating profit

5,681

4.4

6,257

4.5

110.1

99.6

Recurring profit

5,853

4.5

6,444

4.6

110.1

100.0

Net profit

3,981

3.1

4,381

3.1

110.0

101.4

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FY 2019 Efforts in the second half13

1. New Store Openings
 OTC … 2H plan: 32 stores••

Deepen dominant store openings without relaxing store opening criteria andcontinue openings in diverse store formats
In addition to conventional suburban store openings, plan store openings withCremo format, joint store openings with other business types, station front andshopping center store openings, and in-store pharmacies

 Prescription drug stores …2H plan: 20 stores•

Complete pharmacist OTC training and plan to open 20 stores in 2H

2. Renovation of Existing Stores
 OTC…2H plan: 8 stores, full-year plan: 15 stores•

Focus on health & beauty lineup, review lineup, in-store prescription drugstores

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3. Sales Promotions
 Review sales promotion methods••

Implement points-based sales promotion to increase frequency of store visits
Issue coupons that match characteristics of customer purchases

 Release official smartphone app: planned for March 2019•

Provide point card function, distribute point coupons, disseminate variety ofinformation

4. SG&A Expense Reduction
 Improve store operations••

Introduce expiration date checking system at all stores
Enhance accuracy of computer-assisted ordering Reduce costs•

Appearance of reduction effect from review of all expenses tackled since 1H⇒Expect to reduce outsourcing expenses, electricity rates, fixtures andfittings and other expenses from 2H15

5. Initiatives by Prescription Drug Stores
Establishment of Local Support System
 Expansion of home-care service stores
1H: 122 stores  FYE plan 141 stores (+19 stores)• Expand number of service stores by strengthening home-care service system andcoordinating with home-care doctors

 Implement health consultation tailored to customer needs
1H: 130 stores  FYE plan 138 stores (+8 stores)• Organize health and nutrition seminars, provide blood tests

 Train family pharmacists•Enhance pharmacist education and retention rates

 “Industry-government-academia collaboration projec” with Tokai University
and Kanagawa Prefecture•

Recommend specific health checkups using pharmacy health support functions
FYE May 2018

November 30, 2018

FYE May 2019 target

57

52

35points

136

131

133
0points

35points

740points

35points

0points16

5. Initiatives by Prescription Drug Stores
Generics Dispensing System Generics usage rate1H: 77.15%  FYE plan: 80.00% (+2.85%)•Continue aiming to increase premiums, and maintain improvement in usage rate

Premium III:85% -45 stores (+24 stores vs. 1H)

Premium II:

80% -61 stores (+7 stores vs. 1H)

Premium I:

75% -46 stores (-10 stores vs. 1H)

No premium:58 stores (+1 store vs. 1H)
November 30, 2018

FYE May 2018

87357

4262
26points

22points

18points

FYE May 2019 target

2154

56
0points

26points

22points

18points

0points

26points

58454661

22points

18points

0points17

6. FYE 5/2019 Forecasts (Consolidated)
Full-year forecast does not change

FYE 5/2018(consolidated results)

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

Share(%)

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

59,81922.3

65,900

22.7

110.2

Operating profit

13,861

5.2

14,5805.0

105.2

Recurring profit

14,236

5.3

14,9005.1

104.7

Net profit

9,540

3.6

9,780

3.4

102.5

(million yen)

Share(%)

YoY Change(%)

18