FYE 5/2019 (6/18-5/19) Results Explanatory Meeting
July 11, 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

FYE 5/2019 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 5/2020 Forecasts
1. New Store Openings
2. Revitalization of Existing Stores
3. Sales Measures
4. Productivity Improvement
5. Initiatives by Prescription Drug stores
6. FYE 5/2020 Forecasts (Consolidated)

2

FYE 5/2019 Results

3

1. Profit and Loss Statement (Consolidated)
FYE 5/2018

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

Share

YoY change

(%)

(%)

(million yen)(%)

adjustment inprojection(%)

Net sales

268,161100.0

286,299

100.0

106.8

98.4

Gross profit

73,681

27.5

78,953

27.6

107.2

98.1

SG&A expenses

59,81922.3

64,711

22.6

108.2

98.2

Operating profit

13,861

5.2

14,241

5.0

102.7

97.7

Recurring profit

14,236

5.3

14,623

5.1

102.7

98.1

Net profit

9,540

3.6

9,719

3.4

101.9

99.4

4

2. Balance Sheet (Consolidated)
End of FYE 5/2018

End of FYE 5/2019(Consolidated)(Consolidated)

Change121,412133,315+11,902

Current assets

71,21275,763+4,551

Fixed assets

50,20057,551+7,351

52,03556,426+4,391

Current liabilities

47,01950,718+3,699

Fixed liabilities

5,015

5,707+691

Total net assets

69,37776,889+7,511

Total liabilities and netassets

121,412133,315+11,902

Total assets

Total liabilities(million yen)
53. New Store Openings
 OTC: 44 store openings (plan: 52 stores) /Prescription drug stores: 25 store openings (plan: 25 stores)FYE May 2019
Number ofstore openings

Kanagawa

Tokyo

Shizuoka

Chiba

Other

TotalOTC

23

67

4

444

In-store
pharmacies

15521225

Store closures OTC: 4 stores Contract expiration: 2 stores Improvement of management efficiency: 2 storesPrescription drug stores 2 stores Contract expiration: 1 store (in-store pharmacy) Improvement ofmanagement efficiency: 1 store (dedicated prescription drug store)• Continued to carry out dominant store openings• Store openings (new types of business)
 2 Cremo stores/2 joint store openings with other types of business• Opened 25 prescription drug stores (in-store pharmacies) as planned

May 31,
2019
Numberof stores

Kanagawa

Tokyo

Shizuoka

Chiba

OtherTotalOTC

337

9983

3941599

In-store pharmacies

10530

18911173

Rate of pharmacy
establishment in OTC stores

31.2%

30.3%

21.7%

23.1%

26.8%

28.9%

Dedicated prescription
drug stores

25602235

Total number of stores

36210583

4143634
6

3. New Store Openings■Cremo: 2 stores■ Joint Store Openings with Other Types of Business: 2 stores・ Attract specialty stores handling 3 types of perishables inside Create stores74. Renovation of Existing Stores

 OTC: 30 stores• Focus on health & beauty: 11 stores (1) Renovation of non-food stores and shopping center stores(2) Renew old types of MD• Optimization of perishables sections: 19 stores
 Increase or decrease perishables sections flexibly depending on store
locations and needs

 Prescription drug stores: 8 stores• Renovation in response to collaborations with medical institutions:
3 stores• Extension of pharmacies and customer waiting space in response toincrease in number of prescriptions: 3 stores• Installation of sterile dispensary in response to increase in demand forhome medical care, and extension of pharmacies: 2 stores85. Performance Highlights
Net Sales 106.8% vs. previous year (98.4% vs. plan), 99.7% vs. previous year forexisting stores•••

Reverse effect owing to discount coupon-based sales promotion in previous June/December
Slump in sales of seasonal products due to adverse weather, including heatwave and warm winter,and decrease in pollen dispersion
Delay in store openings/Internal competition
2018.5期
FYE May 2018<Year-on-Year
Changes in Monthly Sales of Existing Stores>＜既存店売上高前期比の月次推移＞

(%)
（％）
104

FYE May 20192019.5期

103
102
101
100
99
Slump in sales of seasonal
products due to warmwinter

98
97
Reverse effect of discountcoupon-based salespromotion

96

Decrease in pollen
dispersion

95
Jun.

Jul.

Aug.

Sep.

Oct.

Nov.

Dec.

Jan.

Feb.

Mar.

Apr.

May

9

5. Performance Highlights
Net Sales
・ Sales by segment are driven by specialties (prescriptions) and convenience (foods)
・ Prescription Department’s sales composition ratio increased 0.6 points to 8.7%
FYE 5/2018
Net sales(million yen)

Medical and healthproducts(O T C)(Prescription)
Cosmetics
Food products
Daily products
OtherTotal

FYE 5/2019
Share
(%)

Net sales(million yen)

Share

YoY change(%)(%)

65,04424.4

69,94024.6107.5

43,38821,65537,449104,819
43,932
14,987266,233

16.3
8.1
14.1
39.4
16.5
5.6
100.0

45,305
24,63539,307112,939
46,255
15,828284,270

15.9
8.7
13.8
39.7
16.3
5.6
100.0

104.4
113.8
105.0
107.7
105.3
105.6
106.8

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

10

5. Performance Highlights
Gross Profit Ratio Gross profit ratio 27.8% +0.1 point vs. previous year, 0.0 points vs. plan
<Improvement factors>••••

Review of sales promotion measures (switch from discount coupon-based sales promotion to pointsbased sales promotion to maintain frequency of store visits)
Growth in dispensing sales share
Streamlining of logistics
Improvement in merchandise purchasing<Factors for worsened 4Q performance>••

Slump in sales of seasonal products due to warm winter and decreased pollen dispersion
Jump in food and other costs
FYE May 20182018.5期
2019.5期
FYE May 2019

<Changesin quarterly gross profit ratios>＜荒利率の四半期推移＞
29.0%
28.5%
28.0%
27.5%
27.0%

Slump in sales of hay fevertreatments
Jump in food and other costs

26.5%
1Q

2Q

3Q

4Q

11

5. Performance Highlights
SG&A Ratio SG&A ratio 23.08% +0.31 points vs. previous year, -0.05 points vs. plan
Personnel expense ratio: 11.94%, +0.19 points vs. previous year, -0.14 points
vs. plan
Other expense ratio: 11.14%, +0.12 points vs. previous year, +0.10 points vs.
plan<Personnel expense ratio factors behind increase vs. previous year>•Increase in unit labor costs (employee wage and hourly pay increases)<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 at existing stores: 97.0% vs. previous year

<Factors for increased other expense ratio>•Rent expenses
 Increase in rent expenses per store• Utilities expenses
 Increase in unit fuel adjustment costs mainly due to sharp oil price rises/Increases inbasic utility charges and utility usage due to summer heatwave
125. Performance Highlights
Prescription Department•••

Prescription drug unit prices fell due to the NHI price revisions
The number of prescriptions remained strong due to the widespread acceptance ofprescriptions
Gross profit ratios are improving due to dispensing fee revisions
FYE May 2018
Full-year
ActualSales - All stores(Million yen)

Number of prescriptions(1,000 cases)

Prescription drug unit
price(Yen)Gross profit ratio - Allstores(%)

Sales - Existing stores(Million yen)

Number of prescriptions(1,000 cases)

Prescription drug unit
price(Yen)FYE May
2019
1H Actual

YoYchange(%)

FYE May2019
2H Actual

21,655 11,448 112.4 13,186

YoYchange(%)

FYE May 2019
Full-yearActual

YoYchange (%)

115.0

24,635

113.8

2,410

1,319

117.6

1,479

114.8

2,799

116.1

8,837

8,540

95.7

8,782

100.3

8,668

98.1

41.0

39.6

1.5

40.6

0.3

40.2

0.8

20,178 10,750 106.3 12,673

111.3

23,424

108.9

2,213

1,220

109.8

1,413

110.7

2,634

110.3

8,974

8,672

97.0

8,840

100.7

8,762

99.0

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5. Performance Highlights
Prescription Department■ Number of stores with local support system premiums:
71stores（+19stores vs. previous year ）March 30, 2018

FYE May 2018

FYE May 2019

55

5271

12532points
32点

137

1330points
0点

35points
35点

0points
0点

35points
35点

0points
0点■ Generics usage rate: 78.55％（+3.01pt vs. previous year ） *Market: 75.7％
March 30, 2018

FYE May 201816
60
22points
22点

73

104
18points
18点

0points
0点

8

FYE May 20194251 2862

53

26points
26点 22points
22点 18points
18点

0points
0点

26points
26点

22points
22点

76
18points 0点
0points
18点

14

5. Performance Highlights
Prescription Department

 Promotion of regional medical collaboration• Attract regionally required medical
institutions• Obtain externally dispensed prescriptions

Increase in the number ofprescriptions per store• Follow-up activities after the closure ofpharmacies located close to hospitals

 Regional activities to improve symptoms of malaise• Industry-academia-government collaboration activities by Kanagawa
Prefecture, Hiratsuka City and Tokai University
 Recommend that participants in health consultations offered at pharmacies
receive medical checkups

15

6. Profit and Loss Statement (Create SD)
FYE 5/2018

FYE 5/2019% ofShare(million yen)

Share

YoY change（％）(%)(million yen)（％）

adjustmentin projection(%)

Net sales

266,233

100.0

284,270

100.0

106.8

98.4

Gross profit

73,663

27.7

78,915

27.8

107.1

98.1

SG&A
expenses

60,61922.8

65,612

23.1

108.2

98.2

Operatingprofit13,0444.9

13,302

4.7

102.0

97.6

Recurringprofit13,408

5.0

13,671

4.8

102.0

98.0

Net profit

9,159

3.4

9,218

3.2

100.6

100.6

16

FYE 5/2020 Forecasts

17

1. New Store Openings
 OTC: 45 stores•Carry out dominant store openings in areas where
existing stores are located (1) 50% in Kanagawa(2) Focus on Tokyo, Chiba, and eastern Shizuoka• Continue to open new types of stores 2 Cremo stores/2 joint store openings with othertypes of business Prescription drug stores: 30 stores•Open all pharmacies within stores => Ratio of in-store
pharmacies at year end: 31.6%• Store openings in collaboration with regional medicalinstitutions
 (1) Store openings in collaboration with clinics(2) Store openings to obtain externally dispensed
prescriptions• 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*Scheduled to close 2 OTC stores18

2. Revitalization of Existing Stores Renovation: 35 stores• 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• In-store prescription drug stores• Renovation of prescription drug stores Focus on selling health & beauty products• Expand sales of health & beauty products by increasing the customer visitfrequency through the enhancement of convenience• Review the spaces for selling health & beauty products, and concentrate on
selling these products Offer better customer service (aim to become a company that canhandle customers in the most appropriate manner in Japan)• Improve operations requiring face-to-face customer treatment such as thehandling of customers within stores and cashier operations19

3. Sales Measures

 Promote cashless transactions andhandle consumption tax hikes• Introduce “Osaifu Hippo,” a points card with emoney functions
 Improve customer convenience and reduce
money management burdens(1) Attract and keep good customers(2) Increase customer visit frequencies andmonthly purchase amounts(3) Restrict settlement fees
• Use official app.
 Promote 1-to-1 marketing
Change from sales promotions uniformly
conducted for all visitors to active sales
promotions in line with customer
characteristics

20

4. Productivity Improvement
 Measures to improve the productivity of OTC operations• Continue to enhance accuracy of computer-assisted ordering• Expiration date management system
 Improve expiration date management and reduce the burden of carryingout confirmations by introducing the system at all stores Measures to improve productivity at prescription drug stores• Introduce computer-assisted ordering for prescription drug stores Improve stock-out situations at pharmacies that handle prescriptions on awidespread basis and are required to have a variety of stocks• Introduce a medicinal e-pocketbook and prescription transmission app at allpharmacies
 Reduce waiting times and uniformly manage medicinal information• Improve work by installing dispensing equipment• Reduce stock items and strengthen negotiation abilities by integrating genericmedicines• Help medical assistants play active roles
 Reduce pharmacists’ physical work, and place more emphasis onoperations requiring interpersonal skills

21

5. Initiatives by Prescription Drug stores

 Strengthen health care support functions• Train family pharmacists
 Increase family pharmacists who can add consultancy fees andapplicable stores• Increase stores that are added to the regional support system Collaboration with reginal medical institutions/Increase family
pharmacists• Expand home-case service
 Expansion of home-care service stores
 Strengthen the follow-up system by appointing pharmacists specializing
in in-home care HR Development• Expand the pharmacy training center Increase the number of pharmacy trainees and offer medical assistantseminars in a more satisfactory manner• Establish a new home care training center

226. FYE 5/2020 Forecasts (Consolidated)
FYE 5/2019

FYE 5/2020(consolidated)(consolidated)
YoY

Share
(million yen)

Sharechange(million yen)
（％）

（％）
(%)

Net sales

286,299

100.0

307,600

100.0

107.4

Gross profit

78,95327.6

85,050

27.6

107.7

SG&A expenses

64,711

22.6

70,080

22.8

108.3

Operating profit

14,241

5.0

14,9704.9

105.1

Recurring profit

14,623

5.1

15,3005.0

104.6

Net profit

9,719

3.4

10,2703.3

105.7

23