Summary of Financial Results for the Second Quarter Ended February 29, 2020
[Japan GAAP] (Consolidated)
April 9, 2020
Company
Stock Code
Representative
Contact

Watts Co., Ltd.

Listed on the TSE

2735
URL: https://www.watts-jp.com
Fumio Hiraoka, President and CEO
Hidehito Mori,T E L: +81-6-4792-3280
Executive Managing Director, Head of Corporate Planning Office
Expected date of filing of quarterly report: April 9, 2020
Expected starting date of dividend payment: Preparation of quarterly supplementary financial document: Yes
Quarterly results briefing: Yes (for institutional investors)（Rounded down to million yen）

１. Consolidated business results for the six months ended February 2020
(September 1, 2019 through February 29, 2020)(1) Consolidated results of operations(% change from the previous corresponding period)
Sales

Operating profit

Million yen% Million yen%
Six months ended Feb. 2020
25,982
1.3
786
114.5
Six months ended Feb. 2019
25,648
7.3
366
-38.7
(Note) Comprehensive income
Six months ended February 2020: 421 million yen (-%)
Six months ended February 2019: -6 million yen (-%)
Net income
Diluted net income perper share
share
Yen
Yen
Six months ended Feb. 2020
31.39
Six months ended Feb. 2019
7.70-

Net income attributable toowners of parent

Recurring profit
Million yen
783
337

%
132.4
-44.0

Million yen
420
103

%
306.6
-72.7

(2) Consolidated financial position
Total assets

Net assets

Million yen
As of Feb. 2020
22,230
As of Aug. 2019
21,557(Reference) Shareholders’ equity:
As of February 2020: 10,437 million yen
As of August 2019: 10,150 million yen

Million yen
10,153
9,867

Shareholders’ equity
ratio
%
46.9
47.1

2. Dividends
End of 1Q
Yen-

End of 2Q
Yen
0.00
0.00

Year ended Aug. 2019Year ending Aug. 2020
Year ending Aug. 2020 (forecast)(Note) Revisions to dividend forecast for the current quarter: None

Annual dividend
End of 3Q
Yen-

Year-end

-

Total

Yen
10.00

Yen
10.00

10.00

10.00

3．Forecast of consolidated business results for the fiscal year ending August 2020
(September 1, 2019 through August 31, 2020)(% change from the previous corresponding period)
Sales
Million yen

Operating profit%

Million yen

Year ending Aug. 2020
0.9
770
51,860(Note) Revisions to business forecast for the current quarter: None

Net income attributable toowners of parent

Recurring Profit%

Million yen

%

7.4

790

20.4

Million yen

350

Net income
per share

%

Yen

395.9

26.12

*Notes(1) Changes in significant subsidiaries during the period (changes in specified subsidiaries accompanying changes inthe scope of consolidation): None
(2) Application of accounting procedures specific to preparation of the consolidated quarterly financial statements:
None(3) Changes in accounting policies, accounting estimates and restatement①Changes in accounting policies associated with revision of accounting standards:②Changes in accounting policies other than ①③Changes in accounting estimates④Restatement: None: None: None: None(4) Shares outstanding (common stock)① Number of shares outstanding at the end of period (treasury stock included)
As of February 2020
13,958,800 shares
As of August 201913,958,800 shares② Treasury stock at the end of period
As of February 2020
560,874 shares
As of August 2019
560,874 shares③ Average number of stock during period (quarterly cumulative period)
Six months ended February 2020
13,397,926 shares
Six months ended February 201913,440,919 shares(Note) The number of treasury stock at the end of period includes the Company’s shares held by the share issuance trust for directors(FY8/20 2Q: 60,000 shares, FY8/19: 60,000 shares). In addition, the Company's shares owned by the share issuance trust for
directors are included in treasury stock deducted for calculation of the average number of shares during period (FY8/20 2Q:
60,000 shares, FY8/19: 60,000 shares).

*Quarterly financial summary is not subject to auditing procedures by certified public accountants or auditing firms.
*Explanation regarding appropriate use of business forecasts and other special instructions(Caution concerning forward-looking statements)
The forward-looking statements regarding future performance in this material are based on information currently available
to the company and certain assumptions that the company deems to be reasonable at the time this report was prepared.
Therefore, the company does not make promises about the achievements. Actual results may differ significantly from theforecasts due to various factors.

1. Results of Operations……………………………………………………………………………………..…………………………. 2(1) Analysis of operating results……………………………………………………………………………………………………. 2(2) Analysis of financial position………………………………………………………………………………………………...…. 3(3) Future forecast information including consolidated business forecasts……………………………………………………...…. 3
2. Quarterly Consolidated Financial Statements……………………………………………………………………….…………...…. 4(1) Quarterly Consolidated Balance Sheets………………………………………………………………………….…………...…. 4(2) Consolidated Statements of Income and Statements of Comprehensive Income………………….…………….…………...…. 6
Quarterly Consolidated Statements of Income
Second quarter.…………………………………………………………….………………………………………………. 6
Quarterly Consolidated Statements of Comprehensive Income
Second quarter.…………………………………………………………….………………………………………………. 7(3) Quarterly Consolidated Statements of Cash Flows………………..…………….………………………………………………. 8(4) Notes to quarterly consolidated financial statements……………..…………….……………………………….………………. 9(Notes on going concern assumption) ………………………………………….…………………………………………..…. 9(Notes if there is a significant change in the amount of shareholders' equity)………………………………………………… 9

1

1. Results of Operations(1) Analysis of operating results
During the six months ended February 2020, the Japanese economy underwent a major change around February, with thecorporate sector experiencing a slump in exports before February due to worsening global business confidence and thestagnation of trade talks between the U.S. and China, while capital investment demand related to labor saving remained strong.
As for the consumer sentiment, wage growth was moderated reflecting the drop in corporate earnings. Even under thecircumstances, there were rush demand prior to the consumption tax hike and its reactionary fall, but the fluctuation in demand
was smaller than at the time of the last consumption tax hike in 2014, due to the introduction of a reduced tax rate and various
monetary easing measures. However, from February the new coronavirus (COVID-19) has spread across Japan and overseas,
corporate capital investment declined reflecting the impact of deteriorating business performance. Exports also slumped due toa drop in sales to China and a decline in inbound tourism consumption. Consumer sentiment also weakened due to a growing
mood of self-restraint for going out, after school closures and various event cancellations.
Given this environment, in addition to the 100-Yen shop business in Japan, the Company, which operates the “Watts”,“Watts with”, “meets.”, “silk”, etc., has been working on diversifying its revenue sources by undertaking other domestic
businesses, centering on the sale of life-style goods and discount goods as well as overseas business.
In the domestic 100-Yen shop business, the Company is continuing to promote the introduction of products with prices higher
than 100 yen (from 200 yen to 1,000 yen). In addition, the Company also opened the Watts Online Shop in response to requests
from customers who want to buy the Watts products they saw on SNS, or who do not have a nearby store.
As for the new shop openings, the Company opened 72 shops to the full-year plan of 140 shops. There were 40 shop
closings (including 2 franchised shops), including certain unprofitable shops and unpredictable closing of shops where theCompany’s shops were located in. As a result, the total number of 100-Yen shops at the end of the second quarter was 1,224,
which includes 1,198 directly managed shops (net increase of 34), and 26 franchised/other shops (net decrease of 2).
Of these, the number of "Watts" and "Watts with", the Watts brand shops, was 588 (net increase of 68), accounting for morethan 48.0% of the total.
As for the number of the domestic other shops at the end of the second quarter, “Buona Vita,” a life-style goods shop
offering comfortable life, was 21 shops (net increase of 1). The Company is working on sales promotion activities utilizing
LINE@ and improving the wrapping skills of employees. “Søstrene Grene”, a Denmark’s life-style variety shop, opened 2
shops in a low-cost format, while closing the Omotesando and Marui Kichijoji shops, bringing the total to 5 shops. “Value100,” the fresh-foods supermarket collaboration, continues with 1 shop (unchanged). "Real", a discount shop, was 6 shops(unchanged).
Regarding the overseas operation, the Company operates “KOMONOYA”, a fixed-price shop mainly in Southeast Asia. At
the end of the second quarter, “KOMONOYA” operates 53 shops in Thailand (net increase of 4), 6 shops in Malaysia (netdecrease of 2), 7 shops in Vietnam (net decrease of 2), and 20 shops in Peru (unchanged). In China, a fixed price shop “小物家园”(KOMONOKAEN) was 2 shops (unchanged). The total number of own-brand shops “KOMONOYA” and “小物家园”(KOMONOKAEN) was 88 (unchanged). Despite an increase in wholesale sales to Vietnam and the Philippines, overseas
business sales declined due to a reactionary fall from the excess orders placed in Thailand in the previous fiscal year.
100-Yen shop same-store sales were strong due to the effect of introducing products with prices higher than 100 yen and therise in demand for mask and sterilization-related products reflecting the expansion of COVID-19. As a result, for the six
months ended February 2020, sales were 25,982 million yen (up 1.3% YoY, 101.9% to the plan), operating profit was 786
million yen (up 114.5% YoY, 262.1% to the plan), recurring profit was 783 million yen (up 132.4% YoY, 252.6% to the plan),and net income attributable to owners of parent was 420 million yen (up 306.6% YoY, 350.5% to the plan). (*Year on year:
comparison with the results for the same period of the previous fiscal year. Ratio to plan: ratio to the business forecasts for thesix months ended February 2020 which were announced in the Summary of Financial Results on October 10, 2019.)
The net loss attributable to noncontrolling interests of Hilmer Japan Co., Ltd., was not recorded in the six months ended
February 2020 since it exceeded the maximum amount that could be recorded.
Since the Group operates under a single segment consisting of the operation of 100-Yen shops associated business,segment information is omitted.

22. Analysis of financial positiona. Assets, liabilities and net assets(Assets)
As of the end of the current second quarter of the fiscal year, current assets stood at 16,607 million yen, increased by 508
million yen from the end of the previous fiscal year. This was mainly due to increases of 503 million yen in cash and deposits
and 117 million yen in merchandise and finished goods despite a decrease of 101 million yen in notes and accounts receivabletrade.
Fixed assets stood at 5,623 million yen, increased by 164 million yen from the end of the previous fiscal year. This is mainly
because deferred tax assets increased by 186 million yen.
As a result, total assets stood at 22,230 million yen, increased by 673 million yen from the end of the previous fiscal year.
(Liabilities)
As of the end of the current second quarter of the fiscal year, current liabilities stood at 10,631 million yen, increased by 255
million yen from the end of the previous fiscal year. This was mainly due to increases of 515 million yen in electronicallyrecorded obligations and 120 million yen in income taxes payable, despite a decrease of 384 million yen in notes and accounts
payable-trade.
Fixed liabilities stood at 1,445 million yen, increased by 130 million yen from the end of the previous fiscal year. This was
mainly due to an increase of 111 million yen in long-term loans payable.
As a result, total liabilities stood at 12,077 million yen, increased by 386 million yen from the end of the previous fiscal year.
(Net assets)
As of the end of the current second quarter of the fiscal year, net assets stood at 10,153 million yen, increased by 286 million
yen compared with the end of the previous fiscal year. This is mainly because retained earnings increased by 286 million yen.
As a result, shareholders’ equity ratio stood at 46.9% (47.1% at the end of the previous fiscal year).
b. Cash flows
Cash and cash equivalents (hereinafter referred to as “cash”) at end of the current second quarter of the fiscal year amounted
to 6,578 million yen, increased by 503 million yen from the previous fiscal year.
Details and breakdown of each cash flow in the second quarter are as follows.
(Cash flows from operating activities)
Net cash provided by operating activities was 842 million yen (376 million yen was provided in the same period of theprevious fiscal year). Cash was provided mainly by income before income taxes of 587 million yen, depreciation andamortization of 205 million yen, increase in notes and accounts payable-trade of 131 million yen, and increase in accrued
consumption taxes of 130 million yen. Cash was used mainly for income taxes paid of 232 million yen.
(Cash flows from investing activities)
Net cash used in investing activities was 317 million yen (503 million yen was used in the previous fiscal year). As for the
breakdown, there were payments for property, plant and equipment of 242 million yen for opening of new shops, payments forintangible assets of 57 million yen.
(Cash flows from financing activities)
Net cash used for financing activities was 36 million yen (186 million yen was used in the previous fiscal year). This was
mainly due to proceeds from long-term loans payable of 400 million yen, repayment of long-term loans payable of 299 million
yen, and cash dividends paid of 134 million yen.
(3) Future forecast information including business forecasts
In the six months ended February 2020, both sales and profits exceeded the plan. However, the Company remains
unchanged its full-year consolidated business forecasts from the announcement on October 10, 2019 in the Summary of
Financial Results due to the ongoing unclear outlook for the COVID-19 infections and its effects for the future. The Company
will promptly disclose information if any revisions are deemed necessary in the future.

3

2. Quarterly Consolidated Financial Statements(1) Quarterly Consolidated Balance Sheets(Thousands of yen)Previous fiscal year
(August 31, 2019)
AssetsCurrent assets
Cash and deposits
Notes and accounts receivable-trade
Merchandise and finished goods
Raw materials and supplies
Consumption taxes receivable
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property, plant and equipment
Buildings and structures
Accumulated depreciation and impairment loss
Buildings and structures, net
VehiclesAccumulated depreciation and impairment loss
Vehicles, net
Tools, furniture and fixtures
Accumulated depreciation and impairment loss
Tools, furniture and fixtures, net
Land
Leased assets
Accumulated depreciation and impairment loss
Leased assets, net
Construction in progress
Total property, plant and equipment
Intangible assets
Other
Total intangible assets
Investments and other assets
Investment securities
Deferred tax assets
Guarantee deposits
Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets

4

Current second quarter(February 29, 2020)

6,075,315
2,535,234
7,081,181
7,571
98,166359,194-57,258
16,099,405

6,578,615
2,433,286
7,198,229
12,62856,350382,923-54,167
16,607,866

1,846,084-1,066,489
779,594
23,480-15,053
8,427
3,566,030-2,873,042
692,988257,800
27,623-14,058
13,56428,3191,780,694

1,899,493-1,083,770
815,722
20,418-13,357
7,061
3,610,345-2,931,784
678,561
257,800
27,623-16,969
10,654
1,769,799

147,681
147,681

190,933
190,933

462,938
373,215
2,498,717
202,091-6,9463,530,016
5,458,392
21,557,797

457,677
559,435
2,447,668
203,849-6,363
3,662,267
5,623,000
22,230,866

(Thousands of yen)Previous fiscal year
(August 31, 2019)
Liabilities
Current liabilities
Notes and accounts payable-trade
Electronically recorded obligations
Current portion of long-term loans payable
Income taxes payable
Accrued consumption taxes
Provision for loss on business liquidation
Provision for bonuses
Other
Total current liabilities
Noncurrent liabilities
Long-term loans payable
Liabilities relating to retirement benefits
Provision for directors’ retirement benefits
Provision for directors' stock-based benefits
Asset retirement obligations
Other
Total noncurrent liabilities
Total liabilities
Net assets
Shareholders’ equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity
Accumulated other comprehensive income
Valuation difference on available-for-salesecurities
Foreign currency translation adjustment
Total accumulated other comprehensive income
Non-controlling interests
Total net assets
Total liabilities and net assets

5

Current second quarter(February 29, 2020)

4,696,346
3,589,730
434,366
245,379
110,152
32,163
187,223
1,080,003
10,375,364

4,311,999
4,105,577
423,450
365,499
199,543
107,007174,256
943,920
10,631,254

572,851
276,781
24,73532,721
152,399
255,893
1,315,382
11,690,746

684,478
288,905
26,07336,850149,922259,709
1,445,939
12,077,194

440,297
1,637,636
8,325,881-273,120
10,130,694

440,297
1,637,636
8,611,882-273,120
10,416,696

5,411

1,863

14,443
19,855-283,500
9,867,050
21,557,797

18,611
20,475-283,500
10,153,671
22,230,866

(2) Consolidated Statements of Income and Statements of Comprehensive Income(Quarterly consolidated statements of income)(Second quarter)(Thousands of yen)Previous second quarter(from September 1, 2018
to February 28, 2019)
Sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating profit
Non-operating revenues
Interest income
Equity in earnings of affiliates
Foreign exchange gains
Royalty income
Compensation income
Other
Total non-operating income
Non-operating expenses
Interest expenses
Early-withdrawal penalty
Equity in loss of earnings of affiliates
Exchange loss
Other
Total non-operating expenses
Recurring profit
Extraordinary income
Surrender value of insurance
Gain on sales of noncurrent assets
Insurance income
Total extraordinary income
Extraordinary loss
Loss on retirement of noncurrent assets
Impairment loss
Loss on liquidation of business
Loss due to disaster
Total extraordinary losses
Income before income taxes and minority interests
Income taxes-current
Income taxes-deferred
Total income taxes
Net income
Net loss attributable to non-controlling interests
Net income attributable to owners of parent

6

Current second quarter(from September 1, 2019
to February 29, 2020)

25,648,425
16,053,143
9,595,281
9,228,680
366,601

25,982,206
16,081,752
9,900,453
9,114,209
786,243

3,851
5,235
2,653
3,333
4,725
19,7994,477
12,153
3,144
24,677
15,60660,0602,492
37,6437,920
1,280
49,337
337,063

2,362
44,578
11,5204,649
63,111
783,192

-

1,260
362
25,13826,761

6,290
135,440
141,731
195,331208,945-18,070
190,874
4,457-98,980
103,4372,376
89,997
107,007
23,228
222,610587,343
353,314-186,551
166,762
420,580
420,580

(Quarterly Consolidated Statements of Comprehensive Income)(Second quarter)(Thousands of yen)Previous second quarter(from September 1, 2018
to February 28, 2019)
Net income
Other comprehensive income
Valuation difference on available-for-salesecurities
Foreign currency translation adjustment
Share of other comprehensive income ofassociates accounted for using equity method
Total other comprehensive income
Comprehensive income(Breakdown)Comprehensive income attributable to owners ofparentComprehensive income attributable to noncontrolling interests

7

Current second quarter(from September 1, 2019
to February 29, 2020)
4,457

420,580-10,353-3,547-8,876
8,224-7,647
11,815-11,005-6,548620
421,200

92,432421,200-98,980-

(3) Quarterly Consolidated Statements of Cash Flows(Thousands of yen)Previous second quarter(from September 1, 2018
to February 28, 2019)
Net cash provided by (used in) operating activities
Income before income taxes and minority interests
Depreciation and amortization
Impairment loss
Amortization of goodwill
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in provision for bonuses
Increase (decrease) in liabilities relating to retirement
benefits
Increase (decrease) in provision for directors’
retirement benefits
Increase (decrease) in provision for directors' stockbased benefits
Increase (decrease) in provision for loss on businessliquidation
Interest and dividends income
Interest expenses
Loss on retirement of noncurrent assets
Decrease (increase) in accounts receivable-trade
Decrease (increase) in inventories
Increase (decrease) in notes and accounts payabletrade
Increase (decrease) in accrued consumption taxes
Other
SubtotalInterest and dividends income received
Interest expenses paid
Income taxes paid
Net cash provided by (used in) operating activities
Net cash provided by (used in) investing activities
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of intangible assets
Payments for lease and guarantee deposits
Proceeds from collection of lease and guarantee
deposits
Payments for asset retirement obligations
Purchase of investment securities
Other
Net cash provided by (used in) investing activities
Net cash provided by (used in) financing activities
Proceeds from long-term loans payable
Repayment of long-term loans payable
Repayment of lease obligations
Purchase of treasury shares
Cash dividends paid
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash
equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period

8

Current second quarter(from September 1, 2019
to February 29, 2020)

195,331
209,192
135,440
1,907
8,376-5,375-6587,343
205,985
89,9972,860-3,673-12,966
12,124-13,839

1,337

4,128

4,128

-

74,844-3,9362,492
6,290
223,300-283,103
95,993-4,5622,362
2,376
101,903-121,934
131,443

8,911-91,263493,839
3,728-1,494-119,808
376,265

130,445-132,058
1,071,957
4,340-1,295-232,845
842,156-368,098-150,096
72,684-242,135
780-57,424-34,233
61,247-2,037-55,933-503,481-45,609-387
300-317,460

500,000-343,268-3,989-135,128-203,892-186,279
1,580

400,000-299,289-3,143-134,297-36,729
15,334-311,914
5,147,120
4,835,206

503,299
6,075,315
6,578,615

(4) Notes to consolidated financial statements(Notes on going concern assumption)
None(Notes if there is a significant change in the amount of shareholders' equity)None9