Summary of Results for FY2013

Lawson, Inc.
April 11, 2014

Copyright (c) 2014 Lawson, Inc. All rights reserved.

1

Financial Results for FY2013
Katsuyuki Imada
Executive Vice President
Corporate Strategy
Assistant to CFO
Corporate Planning Office, Division Director
Copyright (c) 2014 Lawson, Inc. All rights reserved.

2

Earnings Summary of FY2013
Net sales of all stores
Operating profit
Operating profit ratio
Recurring profit
Net profit
EPS (Yen)
Dividend per share (Yen)ROE

FY2011
Actual
1,825.8
61.7
3.4%
61.7
24.8
249.17180
12.0%

FY2012
Actual
1,906.5
66.2
3.5%
65.9
33.1
332.20200
15.2%

Total no. of stores in Japan

10,457

11,130(Consolidated：Billions of yen)

Actual
1,945.3
68.1
3.5%
68.8
37.9
380.04220
16.1%

FY2013
YoY
102.0%
102.8%±0.0%P
104.5%
114.4%+47.84+20+0.9%Pvs. Plan
97.9%
97.3%
±0.0%P
100.7%
105.8%+20.68+0.8%P

11,606+476▲24

Note: The number of stores is a total number of convenience stores in Japan operated by the Lawson group.
Note: Change vs. the plan indicates comparison with the plan announced at the second quarter of FY2013

 Consolidated operating profit increased 2.8% YoY but fell short of the plan by 2.7%.
In order to raise profits at franchise stores, expenditures were made to accelerate the additionof MACHI cafés at stores and our in-store kitchen facility, Machikado Chubo, as well as assisting
improvement of the assortment of merchandise. This resulted in falling short of the operating profit plan.
 Consolidated net profit exceeded the plan by 2.0 billion yen and achieved a 14.4% YoY growth
In addition to a significant increase in recurring profit, the amount of deferred income taxes
decreased as business restructuring of Ninety-nine Plus led to realizing an income tax effecton subsidiary shares. Hence, net profit was up 4.7 billion yen, achieving a double-digit YoY growth.
Copyright (c) 2014 Lawson, Inc. All rights reserved.

3

Existing Stores (Non-Consolidated*)* excluding LAWSON MART/LAWSON STORE100 business110.0%

1.5%<FY2013>Gross profit margin up 0.5ppt

105.0%

1.0%
0.5%

100.0%

0.0%
Existing store sales down 0.2%
(number of customers down 1.0%,
spending per customer up 0.8%)

95.0%
90.0%

-0.5%
-1.0%
-1.5%

1H

2H

1H

FY20102H
FY2011Gross profit margin difference (YoY, Right）
Existing stores gross profit（YoY, Left)

1H

2H
FY2012

1H

2H
FY2013Gross profit margin difference, excl. cigarette sales (YoY, Right）

Existing stores sales（YoY, Left）

 The existing store sales YoY growth target was achieved, by an increase of 0.1% in the 2nd half
and a decrease of 0.2% for the full year, despite the adverse impact from inclement weather inthe 1st half.
 Gross profit margin improved 0.5 ppt, due to contributions by over-the-counter fast foods,
processed foods, and non-food products. Excluding cigarettes, gross profit margin improved 0.4
ppt YoY.
 As a result, gross profit of existing stores, which directly links to profit of franchised stores,
increased 1.5% YoY.
Copyright (c) 2014 Lawson, Inc. All rights reserved.

4

Store Openings (Non-Consolidated*)
Net store increase （Left）
Store opening (Left)*excluding LAWSON MART/LAWSON STORE100 businessStore Closure （Left）
Daily sales per new store （Right）(Net store increase) 1,200600(Daily new store
sales in 1,000 yen)

900

480

735

600
Additional stores of
CVS Bay Area Inc.

300

383

360
240

0
120

-300

352
-600

0
FY2010FY2011FY2012FY2013

 Stores opened: 65 less than planned, due to a drop in transfer aimed at enhancing existing stores, and qualityfocused location selection. As a result of sticking to the profit-focused store opening policy, average daily sales
per new store were higher than the previous year, at 506,000 yen.
 Stores closed: 48 less than planned, due to the effects of measures to enhance existing stores and improve
store owners’ profits.
 Plan for FY2014 (excluding LAWSON MART and LAWSON STORE100): 980 openings, 400 closures, and net increase of 580 stores(including 90 converted Keihanna stores)
Copyright (c) 2014 Lawson, Inc. All rights reserved.

5Key Components of SG&A Expenses
FY2013
FY2012FY2014
Actual Actual Change
Forecast
198.7
213.9
+15.2 Increase 10-15%(Billions of yen)

Selling, general & administrative expenses

Nonconsolidated＜Major Strategic Expenses＞
Personnel expenses
IT-related expenses(Hardware leasing, software amortization, maintenance, etc.)
Advertising and promotional expenses

Consolidated SG&A expenses*Including うち、九九プラス社影響
the impact of around 5% 約5%
from thebusiness restructuring of Ninety-nine Plus.

34.9
15.0

35.8
14.7

0.9
▲ 0.3

Increase 0-5%
Increase 0-5%

10.6

9.0

▲ 1.6

Increase 5-10%

276.3

290.4

+14.1

Increase 0-5%Note) Non-consolidated result of FY2013 and forecast of FY2014 include the figures of Ninety-nine Plus.

Compared to Fiscal 2012

Copyright (c) 2014 Lawson, Inc. All rights reserved.

(Consolidated) 1.0 billion yen more than the plan.
 Aggressive introduction of MACHI café and Machikado
Chubo; increase in staff to enhance new store
development

Consolidated

Consolidated

 Decrease in expenses caused by LAWSON STORE100 being
franchised and reduction of expenses for the Lawson ATM
Networkｓ. This led to a smaller difference in expenses on aconsolidated base from those on an non-consolidated base.

Non-consolidated

Non-consolidated

 Advertising and promotional expenses: Impacted by the groupinternal transaction with SCI, a subsidiary serving supply chain
management of convenience store businesses. (Excluding this,adjusted expenses increased by 6%). In addition, costs wereincurred for improving the assortment of merchandise basedon new FC contracts.
 Other: Increase in expenses for facilities, due to net increasein stores, refurbishing, introduction of MACHI café andMachikado Chubo, etc.

Compared to Plan

(Non-consolidated) 1.4 billion yen less than the plan.
 Held down LAWSON STORE100 openings ahead of
conversions to LAWSON MART; drop in openings inShanghai

6

Earnings of Major Subsidiaries(Billions of yen)

＜Operating Profit of Major Subsidiaries＞
Ninety-nine Plus, Inc.
Lawson Mart, Inc.
Smart Kitchen, Inc.
Lawson HMV Entertainment, Inc.
Lawson ATM Networks, Inc.
Chongqing Lawson, Inc.
Shanghai Hualian Lawson, Inc.

FY2013

FY-endOwnership

Actual

Feb.
Feb.
Feb.
Feb.
Feb.
Dec.
Dec.

100.0%
100.0%
100.0%
100.0%
76.5%
100.0%
94.0%

1.70
0.09
▲ 1.482.81
6.08▲ 0.84▲ 0.40FY2014
YoY change Forecast▲ 0.380.09▲ 1.21+0.37+1.33▲ 0.160.17

0.40▲ 0.303.10
5.80▲ 0.80▲ 0.30Note: Ninety-nine Plus, Inc’s operational functions were succeeded by Lawson Mart, Inc on February 1, 2014 and it was absorbed and merged by Lawson, Inc.
Note: Smart Kitchen, Inc. will be absorbed and merged by Lawson, Inc on July 1, 2014, so the forecast include only the period before this.

Ninety-nine Plus

Sales and profit were weak due to decrease in competetivenesse of small-sized
stores. Developing the new-format LAWSON MART, as Lawson Mart Inc., fromFebruary 2014.

Smart Kitchen, Inc.

Fell short of planned sales and profit amounts due to delay in gaining members,
despite the order price being in line with the plan. Will be absorbed by Lawson,Inc. in
July, aiming at stronger ties with Lawson stores and improved profit.

Lawson ATM Networks

Increased profit due to strong ticket sales, including sales of large-scale concert
tickets and admission tickets for theme parks.

Lawson HMVEntertainment

Increased profit due to growth in ATMs in place in keeping with net growth instores and improved ATM management costs.

Copyright (c) 2014 Lawson, Inc. All rights reserved.

7

Cash Flows and Capital Expenditures (Consolidated)
 Consolidated Capital Expenditures
New stores
Existing stores
IT-related
Other
Subtotal for capital expenditure
Depreciation and amortization（Billions of yen）

FY2011
Actual
21.5
10.2
7.7
0.6
40.2
37.8

FY2012
Actual
33.1
8.7
5.9
3.2
51.0
43.8

FY2013
Actual
32.2
7.0
5.3
2.0
46.7
47.8

FY2014
Plan
44.5
14.5
12.0
1.0
72.0
47.5

Note: For the depreciation method for property, store and equipment (exclude lease assets), Lawson, Inc. and its domestic consolidated subsidiaries adopt straight-line method instead of declining-balancemethod from FY2014. Based on this change, FY2014 plan of depreciation expense is expected to decrease by 5,000 million yen compared to results using declining-balance method.

（Billions of yen）

Consolidated Cash flows
Cash flows from operating activities
Cash flows from investing activities

Free cash flows
Cash flows from financing activities(Cash dividends paid)
Cash and cash equivalents at end of period

FY2011
Actual86.3▲ 52.933.4▲ 27.5▲ 17.1FY2012
Actual85.1▲ 54.130.9▲ 31.9▲ 19.2FY2013
Actual81.5▲ 47.933.5▲ 39.6▲ 20.9

73.6

72.7

68.7

FY2014
Plan
Approx. 100.0
Approx. ▲70.0
Approx. 30.0
Approx. ▲40.0▲ 23.0-

Expect a temporary increase in investment cash flow in FY2014, due toenhancement of existing stores and system investment.
Copyright (c) 2014 Lawson, Inc. All rights reserved.

8

FY2014 Company Forecast, Consolidated
Net sales of all stores
Operating profit
Operating profit ratio
Recurring profit
Net profit
EPS（Yen）
Dividend per share (Yen)ROE

FY2012
Actual
1,906.5
66.2
3.5%
65.9
33.1
332.20200
15.2%

FY2013
Actual
1,945.3
68.1
3.5%
68.8
37.9
380.04220
16.1%

FY2014 Forecast
Plan
YoY
2,029.0
104.3%
75.0
110.1%
3.7% +0.2%P
73.9
107.3%
38.9
102.5%
389.37
+9.33
240
+20
15.4% ▲0.7%P

Total no. of stores in Japan

11,13011,606

12,288101.5%
99.8%
31.0%+0.4%P

101.3% ▲0.2%P
100.0% +0.2%P
31.4% +0.4%P+0.3%P ▲0.1%P(Billions of yen)+682

(Non-consolidated*)*excluding LAWSON MART/LAWSON STORE100 business

Gross profit at existing stores (YoY)
Net sales at existing stores (YoY)
Gross profit margin ratio
Gross profit margin difference excluding
cigarette sales (YoY)

101.2%
100.0%
30.5%+0.5%P

Note: For the depreciation method for property, store and equipment (exclude lease assets), Lawson, Inc. and its domestic consolidated subsidiaries adopt straight-line method instead of declining-balancemethod from next consolidated fiscal year. Based on this change, operating profit, recurring profit are expected to increase by 5,000 million yen respectively compared to results using declining-balance method.
Note: Reflect to the change in store counting standard from fiscal year 2014, small stores (82 stores as of March, 1 2014) also are included in the calculation table of fiscal year 2014.

Plan to increase operating profit for the 12th consecutive year, led by growth in Japan’s
CVS business, despite advanced investment burden for overseas businesses andsome other new businesses.
Copyright (c) 2014 Lawson, Inc. All rights reserved.

9

Lawson’s New Management Team

Chief Executive Officer
Representative Director

Takeshi Niinami

Copyright (c) 2014 Lawson, Inc. All rights reserved.

10

12-year Performance(Billions of Yen)

80.0
70.0

(Yen)

Operating Income and Share Price

8,000
7,000

Operatng profit
Share price at the end of fiscal year

60.0

6,000

50.0

5,000

40.0

4,000

30.0

3,000

20.0

2,000

10.0

1,000

0.0

0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

EPS (Yen)ROE (%)
Dividend (Yen)

82
5.9
41

176
12.1
41

198
13.0
70

216
13.1
90

202
11.3
100

215
11.6
110

240
12.5
160

127
6.5
160

255
12.8
170

249
12.0
180

332
15.2
200

(FY)

380
16.1
220

Since my appointment as the CEO, I strived to increase corporate value by focusing on
developing human capital and fostering innovation.
Lawson will continue to serve our communities and achieve mutual growth.
Copyright (c) 2014 Lawson, Inc. All rights reserved.

11

The Reason of Top Management Change
2011- 2014

I was convinced that measures such as launch of a branchsystem fostered the development of capable managers.
I realized that Lawson requires a teamwork-driven leader tofurther enhance the growth of our company.
I then decided to focus on assisting our management team, led
by a teamwork leader.
Tamatsuka and other executives enhanced their ability by meansof decentralization, delegation of authority, and direct mentorship,
while Lawson’s level of human capital was reinforced throughtraining at Lawson University.
I was convinced that now is the time for a new management team led by
Tamatsuka to take leadership in order to further raise our corporate value.
Copyright (c) 2014 Lawson, Inc. All rights reserved.

12

The unchanged value of Lawson
Lawson’s DNA
Corporate Philosophy“Creating Happiness and Harmony in Our Communities”

Customers

FranchiseownersOur
employees

Local
communities

Innovation

Rewardingshareholders

Capitalefficiency

Emphasison profit…

We are committed to continue increasing our corporate value for all stakeholders.
Copyright (c) 2014 Lawson, Inc. All rights reserved.

13

New Management Team and GovernanceManagement team from May 27 * The appointment will be officially resolved at the General Meeting of Shareholders andthe subsequent Meeting of the Board of Directors

New team of 9 directors
Genichi Tamatsuka,
President and CEO,
Representative DirectorCommitted to realize Lawson’s
corporate philosophy
Strong trust from franchise owners
Broad, proven experience asa corporate executive.

Sadanobu Takemasu
Senior Executive Vice President
Representative Director

Outside directors
5 out of 9 directors(including 3 women, who Strong relationship withare also independent

Mitsubishi corporation
 Role as a supporting
executive to President
Tamatsuka

directors)

Independent directors
3 out of 9 directors
3 out of 4 auditors

Executive officers
Executive officers having various
backgrounds will support
the Tamatsuka team.

In order to avoid having two leaders, I will contribute to raising Lawson’s corporate
value by serving as Chairman without representative right.
Copyright (c) 2014 Lawson, Inc. All rights reserved.

14

Management Policy to
Drive Our Growth Forward

Chief Operating Officer
Representative Officer and Member of the Board

Genichi Tamatsuka
Copyright (c) 2014 Lawson, Inc. All rights reserved.

15

The Five Key Principles
1. Ensure that Lawson's Corporate Philosophy is instilled in ourorganization and its people, respecting the values articulated,
as everything we do is inspired by this Corporate Philosophy.

2. Strengthen the relationship with the franchise owners andachieve mutual growth in addition to collaborative success.
3. Become the world's No.1 manufacturing retailer based on small
commercial areas.
4. Motivate each individual to take initiative and at the same timeadhering to discipline, in order to pursue success.
5. Foster and empower 100 young leaders of the next generation.
Copyright (c) 2014 Lawson, Inc. All rights reserved.

16

Evolution of Lawson’s SCM and CRM
SCM Structural
ReformBefore“Procurement of value-added raw materials” and “cost reduction”

Specific
optimization

Product
development

After

Specific
optimization

Procurement

Specific
optimization

Specific
optimization

Specific
optimization

Processing

Inventory
management

Manufacturing

Specific
optimization

StoresProcessing

A demand/supply balance is controlled by an integrated, optimized value chain.

Every process will be visible.
CRM
Evolution

Analyze the mind set of each customers, by use of advanced marketing technology

From fiscal 2014
Present
Analysis of the mind set ofeach customers and stores

Limitationof POSPOS analysis

Analysis of the mind set ofeach customer

External qualitative and quantitative
data (SNS, surveys, and others. ）Ponta members data
POS data

Copyright (c) 2014 Lawson, Inc. All rights reserved.

17

Leverage Our Strength to Capture More Market Opportunities
Strengthen the selection of
in-store prepared foodLawson Green Project ;Focus on fresh vegetables and fruits

Health-conscious merchandise

Low-carbs
Bran bread

Low-calorie
Special type of rice
Low sugar
Rare sugar desert

Healthy food with good taste
Copyright (c) 2014 Lawson, Inc. All rights reserved.

18

Improve Each Store and Deepen Ties with Franchise Owners
MO（Management
Owner) system

Develop 300 MOs and 3,000-4,000 MO stores in 5 years

Present: About 100 Management Owners (MOs) run about
total of 800 storesRole:
To be a role model of all franchise owners andactively participate
2 storein Lawson’s management
Single store
operation
operation
Criteria for certification: Very high
20 store crews

Area Team
Meetings

40 store crews

Business operation
Multi-store
operation
80 store crews

as Management Owner

Store
Consultant

Store
Consultant

Lawson’s monthly meetings of franchisees, unique in the industry

Franchise owners exchange
views, share experiences, andgained know-how in order toimprove the level of stores inthe same area.
Copyright (c) 2014 Lawson, Inc. All rights reserved.

19

Flexibly Respond to Changes of Community Customers
Aging population
Seniors age 60 and more

1990

2030 （Est.)

21 mn

45 mn

More small households

Improve food-related products and assortment

Ratio of households of singles andcouples with no children
2030 (Est.)
1990

38.6％

57.5％

Change in consumer behavior
and mind● Stronger preference for healthy,

Strengthen and promote health-related initiatives

reliable, safe foods●Increase in shopping refugees

Change in the competitiveenvironment● Surge in the number ofconventional CVS

Reinforce home convenience businesses

Evolve into a CVS model that satisfies broad daily-life needs in each small commercial area
Copyright (c) 2014 Lawson, Inc. All rights reserved.

20

Multi Format Strategy: LAWSON MARTLAWSON MART = Launch of the next-gen convenience store
Convenience of a convenience store and merchandise assortment of a supermarket
Supermarket

Convenience store★Wide assortment of merchandise★24-hour operation★Broad range of services★Compact operation★Large floor space thatenables wide assortment-Fresh foods-Volume sales of selected products-Ninety-nine Plus’ unique sales
skills for fresh foods-Sales of moderate-size portions-Low-cost operation-Single item management skill-Developed scheme of FranchisesystemPlan to open 100 stores in fiscal 2014
Aim to convert half of the current 1,200 LAWSON STORE100 stores
to LAWSON MART in 3 years
Copyright (c) 2014 Lawson, Inc. All rights reserved.

21

Home Convenience Business
Home-delivery platform controlled by Lawson

LAWSON
12,000 storesEntertainmentOne-stop service
to customers
at home or at stores
Fresh and other foods

Open ourplatformto othercompanies

Increase alliances
On-line shopping (via the Internet, TV,and catalogues) and department stores
Strengthen the group synergy of Lawson, such as leveraging distribution network of groupcompanies and open our platform to other companies.
Copyright (c) 2014 Lawson, Inc. All rights reserved.

22

Medium-term Roadmap
Gross
operating profit
Non-consolidated
LawsonConsolidated
operating profit
100 billion yen

Increase grossprofit margin by
0.3-0.5%point per year

Consolidated
subsidiaries

ROE 20%
Dividend increase/share buy-back andcancellation

・Entertainment Business・Overseas BusinessSelling,
general andadministrative
expenses

Existing stores'
gross profit

Net increasein stores
by 5% per year

Industry
consolidation

Mid-term target : Operating profit 100 billion yen and ROE 20%

Copyright (c) 2014 Lawson, Inc. All rights reserved.

23

Emphasis on ROIC
Change in ROIC in Comparison to Competitors (FY2003-FY2013)
Average ROIC for the period (%)

20.0
18.0
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
0.0%

ローソン
ROIC:Lawson+2.3％Pt
EBITDA成長率:+7.8％/年
ROIC:+2.3%Pt

Average of

競合2社平均two
ROIC: competitors-3.3％Pt
EBITDA成長率:+4.8％/年
ROIC: -3.3%Pt

1.0%

2.0%

3.0%

4.0%

5.0%

Increase in

6.0% number of stores

Note 1 ROIC = After-tax operating profit (@40% tax rate)/Averaged invested capital for the period (equity + interest-bearing debts)
Note 2 The horizontal axis indicates changes in number of stores (from FY2003 to FY2013)
Note 3 The arrows indicate changes in ROIC from FY2003 to FY2013

We will maintain discipline in ROIC criteria while pursuing large number ofstore openings this year.
Copyright (c) 2014 Lawson, Inc. All rights reserved.

24Capital Efficiency and Shareholder Return
Changes in annual dividends per share and dividend yield
(Yen)

260
240
220
200
180
160
140
120
100
80
60
40
20
0

240yenDPS（left）
3.1%

Dividend Yield(right)

FY2001 FY02

FY03

FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

5.0%
4.5%
4.0%
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%

FY14
(Forecast)Continuous return execution independent of temporal ups and downs

Copyright (c) 2014 Lawson, Inc. All rights reserved.

25

Corporate Philosophy

Creating Happiness and Harmony
in Our Communities.

Copyright (c) 2014 Lawson, Inc. All rights reserved.

26

Reference

Copyright (c) 2014 Lawson, Inc. All rights reserved.

27

Half Year Breakdown of FY2014 Forecast(Consolidated: Billions of yen)

Net sales of all stores
Operating profit
Operating profit ratio
Recurring profit
Net profit

FY2014Forecast
1st Half 2nd Half Full year
1,024.0 1,005.0 2,029.0
37.9
37.1
75.0
3.7%
3.7%
3.7%
37.2
36.7
73.9
19.4
19.5
38.9

(Non-consolidated*) *excluding LAWSON MART/LAWSON STORE100 business

Gross profit at existing stores (YoY) 101.3%

Net sales at existing stores (YoY) 100.0%

Gross profit margin ratio

Copyright (c) 2014 Lawson, Inc. All rights reserved.

31.3%

101.3%
100.0%
31.5%

101.3%
100.0%
31.4%

28

FY2013 Consolidated Balance Sheet

Total current assets(Cash and deposits)(Accounts receivable)

Total noncurrent assets
Property, plant and equipment
Intangible assets
Investments and other assets(Long-terms loans receivable)(Guatantee deposits)

Total Assets

As of Feb. 28,
2014

Change fromFeb. 28, 2013

195.7
76.7
54.1
425.2
233.4
28.4
163.2
33.7
86.1
620.9

15.4
▲ 8.0
8.1
25.6
24.2
▲ 5.6
7.0
▲ 0.8
0.0
41.1

Copyright (c) 2014 Lawson, Inc. All rights reserved.

Total current liabilities(Accounts payable-trade)(Deposits payable)
Total noncurrent liabilities(Long-term guarantee deposits)

Net Assets(Common stock)(Retained earnings)

Liabilities and net assets

As of Feb. 28,
2014(Billions of yen)
Change fromFeb. 28, 2013

246.7
89.1
87.5
123.7
32.2
250.4
58.5
138.1
620.9

6.9
1.9
0.0
13.9
▲ 2.5
20.3
16.9
41.1

29

Cautionary Statement
This presentation contains forward-looking statements and forecasts regarding the future plans, strategies and performances of
Lawson and its subsidiaries and affiliates. These statements and forecasts are not historical facts. They are expectations based onassumptions and beliefs derived from information currently available to the Company and are subject to risks and uncertainties
including, but not limited to, economic trends, heightened competition in the domestic convenience store sector, personal
consumption, market demand, the tax system and other legislation. As such, actual results may differ materially from estimates.
Figures in this presentation have been rounded down.

Copyright (c) 2014 Lawson, Inc. All rights reserved.

30