Lawson, Inc. INTEGRATED REPORT 2015

INTEGRATED REPORT 2015

East Tower, Gate City Ohsaki, 11-2, Osaki 1-chome,
Shinagawa-ku, Tokyo 141-8643 Japan

http://lawson.jp/en/
Published September 2015
©1975-2015 Lawson, Inc. All rights reserved.
Printed in Japan

200,000
No. of store crew

2,800
No. of items

120

Cycle”

04 Growing in Pursuit of “Happiness andHarmony in Our Communities”
through Our Core Businesses

m2

trillion yen

08
09
12
14
16

Interview with the President
Message from the CFO
Outside Directors’ Perspectives
Financial and Non-ﬁnancial Highlights

20 Delivering Coffee from the Bean to theCustomer’s Tumbler

22 Seeking to Maintain and Promote
Customers’ Healthstores24 Bringing Convenience and Pleasure to
Daily Life

No. of stores in Japan

10

Message from the President

18 Supporting Daily Lives

Net sales for all stores

12,00002 Lawson’s “Corporate Value Creation

06 Addressing Ongoing Social Challenges

Store size

2

CONTENTS

26 Enriching Lifestyles through theEntertainment Business

28 Developing Stores and BusinessmillionApproaches to Better Meet Customers’
Speciﬁc Needs

No. of customers (all stores, per day)

30 Growing with Franchise Stores undera New Franchise System

13.0%
6,000
33%
7.5 billion yen

32 Organization for Sustainable Corporate
Management

ROE

34
37
40
42
48

No. of franchise owners

Female director ratio(Part-time andtemporaryworkers)

FranchiseownersEmployees
Shareholders

Customers

LAWSON INTEGRATED REPORT 2015—Introduction

L a w s o n G r o u p ’s C o r e S t a k e h o l d e r s

This is the third consecutive year the Lawson Group has prepared
an integrated report incorporating both financial and non-financial
information. The purpose of this Lawson Integrated Report 2015 is
to present our medium to long-term stakeholders with an overview
of the Group’s current situation and directions for the future. Besides
outlining our aspirations for business growth centered on our mainstay
convenience store operations, we hope to provide every stakeholder
with a better understanding of our ongoing efforts to become an
essential lifeline for the community.

The Lawson Group conducts its business in cooperation
with society (local communities) as a whole, including
seven core stakeholders. Moving forward, we willcontinue to provide unique value in addressing avariety of challenges facing society and our customers
by leveraging our stores’ accessibility within local
communities.

Community-Citizens
Harmony Project
ReportA simple, clearly written
report on our responses tosocial and environmental
challenges

Corporate GovernanceCorporate Data

Reporting period

This report covers the fiscal year from March 1,
2014 to February 28, 2015, with some reportingon activities before and after this period. For
further details, please visit our website:

Store crew

Local
communities

Developing Human Capital

Report Coverage

Lawson communication media
Suppliers/
business
partners

Social and Environmental Activities

The information in this report concerns primarily
business activities conducted by Lawson,
Inc. and some of its affiliates as well as its
franchise stores. It also extends to operationsof the Lawson Group’s business partners in
the logistics, food manufacturing and wasteprocessing fields for which the partners haveconsented to disclosure.

Customer donations to date

Creating Happinessand Harmony in
Our Communities

Compliance and Risk Management

INTEGRATED REPORT
An overview of the Lawson
Group’s business activities
in local communities and theoutlook for sustainable growth

http://lawson.jp/en/
Financial section
Report on industry trends
and the Group’s businessinitiatives and financial
position in relevant years,
as well as projected
earnings assessment/
analysis and outlook fornext fiscal year

Future forecasts, projections and plans

This report’s coverage extends beyond current
information and data for the Lawson Groupto future forecasts based on its plans andperspectives at the time of publication. These
forecasts represent assumptions and viewpoints
arrived at based on information available as of
the report’s writing. The actual results may differ
from the forecasts due to various circumstancesand external environmental factors.

Financial section

Lawson website

Presents information and data not covered by Lawson publications.

The data in the financial section of this Englishlanguage report constitute official information.
The Japanese-language version does notcontain notes to the financial statements. Please
consult the Japanese-language Lawson, Inc.
Securities Report for these materials.

Net sales for all stores and othernumerical data shown on this page areapproximations as of February 28, 2015.

01Lawson’s “Corporate Value Creation Cycle”

Lawson contributes to the local communities bycreating added value through its customer-oriented
business model.

“Corporate Value Creation Cycle”

Lawson will continue to increase corporate value by leveraging its unique customer-oriented business model as a“manufacturing retailer based on a small commercial area model,” through “R&D in pursuit of innovation” and by“deploying an advanced franchise system.” The Company will optimize its business strategies to ensure this model’s
appropriate implementation.
Lawson seeks to increase both its “visible capital,” such as resources and funds specified in the financial statements,
and its “invisible, but tangible capital” such as human capital and information, by investing appropriately in thesebusiness strategies.
Lawson will continue to contribute to society as a company indispensable to local communities by adhering to its“Corporate Value Creation Cycle.”

InputsLawson’s business
model

Financial capital (funds)

Outputs
Investment determined according to capital discipline
to meet the expectations of the equity market.
• Creating sufficient cash flow
• Establishing a firm financial standing

Capital raised as funds for conducting businessactivities

Human capital (human resources)
Employees’ collective skills and capabilities, personal
motivation and organizational experience that
contribute to sustainable corporate growthIntellectual capital (technologies and brands)
General intangible assets including brands, reputation,
intellectual property and software

Manufacturingretailer basedon a small
commercial
area modelROI-based capital
allocation

Corporate governance

02

Necessary tangible assets for conducting businessactivities, generally referred to as “infrastructure”
including land, buildings, machinery and IT

Advancedfranchise system• Optimization of the supply chain with integrated production and sales• Manufacture of original products with high added value

Value provision for
Lawson’s multiple stakeholders

Nurturing of human resources who are “self-motivated andinnovative” to satisfy local community needs appropriately.

Customeroriented• Nurturing of next-generation management candidates and leaders• Development of human resources under supportive personnel management systems• Success of franchise owners

Cultivation of innovation based on prompt perception ofchanges in local communities.

Suppliers/
business
partners• Lawson brand enhancement• Store development responding to community needs• Ponta data analysis

R&D in pursuit of innovation

Businessstrategies

Social capital (resources and social norms)

Outcomes

Leveraging the full supply chain to develop products thatmeet local community needs.

Manufacturing capital (IT and infrastructure)

VisionLocal
communities(Part-time andtemporaryworkers)

FranchiseownersEmployees

Contributing to communities as social infrastructure withcareful consideration of society and the environment.

Natural resources, social norms and relationships oftrust established with stakeholders

Store crew

Shareholders

Customers• Consideration of the environment throughout the supply chain• Revitalization of communities through enhanced social infrastructure functions

What you want, when andwhere you need it
Competingconvenience store

Manufacturing retailer based ona small commercial area modelSupermarket

R&D in pursuit of innovation
Internet shopping

Unique market

As a “neighborhood store”
model
located within easy walking
distance of customers’ homes
and workplaces, Lawson
provides daily-life products
and services for a full rangeof customer segments, fromyoung people to working womenand elderly residents. Lawson
ensures safety and reliability
through full supply chain
management, from raw materials
procurement and manufacturing
to logistics and sales.

Manufacturing
Raw materials plantprocurement

Logistics

350 mwalking radius

Elderly
residents
Men in their
20s and 30s
Homemakers
Working
women

Drugstore

Home ordering anddelivery services

Lawson respend to social changes,
makes advanced investments andconducts experimental activities.
These activities include developmentof new-style health-oriented and fresh
food convenience stores. Know-how
acquired through these experiments isthen introduced to regular LAWSON
stores in an approach unique toLawson. Lawson is already introducing
home delivery services to explore
potential needs as well as to satisfy
the needs of store customers. Lawson
expects the market for these services
to expand in the context of the aging
society.

Corporate value creation

Logistics

Services

Stores

Products

Challenges(Responding tochanges inour communities)

Advanced franchise system
Lawson is reinforcing its partnerships with franchise stores to promote progress toward harmony in a
spirit of “cooperative business,” while sharing its corporate philosophy and business strategies withthe franchise owners, who have extensive knowledge of their local communities. Lawson promotes
the Management Owner (MO) system among entrepreneurial franchise owners by supporting theirmulti-store operations withknow-how and seminars.
Lawson is also establishing
Socialcontribution
Win-Win relationships
activities
between headquarters and
Win-Winthe franchise stores byDiversified
relationshipproduct
introducing a new franchiselineupcontract under which
headquarters assumes a
LawsonFranchise
Cooperative
portion of their electricity
businessheadquarters
store
expenses and disposal
Proactive
new service
losses.
development

Community

Environmental
preservation
activities

03

Growing in Pursuit of “Happiness and Harmony in Our Communities”

Celebrating its 40 years as the store closest to its
customers. Lawson is integrated into the lives in each
community.

Consolidated net sales for all stores

1,961.9 billion yen

In 2015, Lawson commemorated the 40th anniversary of its foundation in 1975. People were just beginning to prioritize
convenience in every aspect of their lives.
In the years since, Japanese society has evolved and changed dramatically in the face of various issues and challenges.
Lawson has been developing its capabilities and tackling the challenges each community faces through its convenience
store business.
Lawson will continue to pursue “Happiness and Harmony in Our Communities” as the closest store to community residents.

No. of stores in Japan

12,383

The first LAWSON store in Japanwas opened in Osaka Prefecture.

04

Parcel delivery
service

Photocopy

Third-party billsettlement

Automated
teller machine

MailboxInnovation

24Hours

Lawson began business in 1975 with the opening of its first store asa “store that stays open 24 hours a day, every day of the year.” Thesmall sales floor of approximately 100 to 132 m2 was packed witha variety of food and daily necessities, such as bread, cigarettes,
alcohol, stationery and miscellaneous goods, arranged by category.
In subsequent years, LAWSON stores have improved their offeringwith additions such as parcel delivery, public utility payment andconcert ticket sales services as well as mailboxes for posting mailand ATMs for conducting various banking activities. Making these
services convenient helped LAWSON take root in its communities.
At a time when large retail stores were being opened along
highways to serve growing numbers of drivers while the role ofthe shopping mall was diminishing, LAWSON, which served small
commercial areas with diameters of some 300 to 500 m, gained
popularity as a “neighborhood store,” especially among single menin their 20s and 30s.

As the convenience store industry grew, Lawson introduced
NATURAL LAWSON as a “health-oriented” convenience
store in 2001 and LAWSON STORE100 as a fresh foodconvenience store in 2005 in response to social changes suchas the aging of population and the growing role of women in
the workforce. The introduction of these new-style stores led
to the expansion of its customer base by meeting the needsof women and elderly residents that differed from those of
its young male customers. Through repeated experimental
activities of this kind, Lawson’s business model has evolved
into that of a “manufacturing retailer based on a small
commercial area model” that conducts customer-driven R&D
of products and services. The many good-selling products it
has created include rice balls made with Koshihikari rice from
Niigata and premium Swiss rolls using top-quality ingredients.
Lawson has leveraged the franchise system to increase thenumber of stores in its nationwide network by cultivating
franchise owners who fully understand their communities.

Joint delivery system for daily foods introduced.
Full-scale food recycling begun.
Experimental store for environmental and welfare
Comprehensive agreements withmeasures opened.
governments concluded.
Lawson Green Community Fund (current Lawson
Childcare support stores opened.
Green Fund) initiated.
Bag carrying and CO2 offset activities
Clean aid activities begun.
initiated.
ISO14001 environmental management
Sales of OTC drugs begun.*1
system certification obtained.
Donor cards placed at all stores.
Agreement on Cooperation in
Agreement on Support for Commuters
Supplying Daily Necessities in Case
Stranded by Disasters*2 concluded.
of Disasters, Etc.*2 concluded.

Social Changes
1975/6The “Next Infrastructure”

Growth in doubleincome households
Expanding role ofwomen in the workforce

2000/2Adoption of Kyoto
Protocol at COP3

Emergence of thedeclining birth rate issue

After the Great East Japan Earthquake, the convenience store came to be
regarded as the “fourth infrastructure” following electricity, gas and water supply
services. As a store indispensable to communities, Lawson is seeking to realize its
Corporate Philosophy of “Creating Happiness and Harmony in Our Communities.”
Lawson declared the objective of establishing its stores as community healthhubs in response to a rise in health consciousness and followed up by introducing
healthcare-oriented stores and developing original products based on data gathered
through the Ponta loyalty card systems. Lawson has created many products that
respond to customer needs by analyzing the purchasing behavior of over 68 million
Ponta members (as of February 28, 2015), who account for approximately 50% ofsales. In addition, LAWSON stores have introduced such original services as the
Machikado Chubo in-store kitchen and MACHI café fresh-brewed coffee services.
Thus, LAWSON stores are promoting communication with customers by providing
new value its competitors cannot match. In the field of entertainment as well,
Lawson has added unique services such as ticket and CD and DVD sales and movie
theater operation to enrich customers’ lives. Following the acquisition of the SEIJOISHII food-lifestyle supermarket chain, LAWSON stores will continue to contribute to
local communities by serving customers in their own neighborhood.

Consolidated
operating profit

Dream Support Fund scholarship program for children impacted
by the Great East Japan Earthquake established.
Wagon retailing and order delivery service for marginalized
villages introduced.*1
Solar power system installation initiated.
“Happiness and Harmony in Our Communities”
fundraising begun.
Health promotion agreements concluded
with governments.*2*1 At some stores*2 Local governments in various areas and some public organizations

2010/2

Increasing
consumption ofrenewable energy

100 billion yen
2014

6.4%

2022

10%

Growth in market share
Expansion of the convenience store’s
share of the Japanese retail industry(including the food service business)*(Billion yen)
Annual sales by convenience store industry: 10,423
Annual sales by retail industry: 141,219+ Food service industry: 21,029*Source: “Current Survey of Commerce,” Ministry of
Economy, Trade and Industry“Estimated Market Scale of the Food Service
Industry,” Japan Food Service Association*Excluding school lunches, etc.

Freezers and refrigerators using CO2 refrigerants introduced.

Rapidly aging society

05

20%

Further contributions to communities as a neighborhood store

Evolution as a manufacturing retailer based ona small commercial area model

Growth of conventional convenience stores

Equal Employment
Opportunity Act for
Men and WomenTARGET
ROE

Increasing frequencyof extreme weather
events2015/2

Addressing Ongoing Social Challenges through Our Core Businesses

LAWSON stores bring happy smiles to thecommunities every day

Suppliers/
business
partners

In Japan, people have various causes for concern in their lives, including such increasingly serious issues as global
environmental problems, a declining birth rate and an aging population. Lawson considers these issues and challenges
in depth and strives to bring prosperity and happiness to its customers in their local communities through operation of
its core businesses.

Increases in double-income, one-person and two-person households

Responses to diversiﬁcation of lifestyles
With customers’ lifestyles diversifying increasingly as growing numbersof women remain in the workforce after marriage and childbirth, Lawson
continuously identifies the changing trends and emerging needs andsupplies products and services accordingly. LAWSON stores provide
convenience for single-person households and working women by operatingneighborhood stores stocked with daily-life essentials. The Company
leverages its female employees’ experience and knowledge of childbearing
and child rearing in its store operation and product development activities.

1,100

2,500

1,054

1,000

951

900

877

800
700

Labour and Welfare

2,300

2,000
1,500

1991

2002

2012

1,600

1,000

Single-person or
husband-wifehouseholds

1992

2012

Increase in number of senior citizen households

06

All households (left axis)(Thousands of households)
25,00020,00010,000

(%)
50

43.4

36.6

26.9

15,000Source: 2014 White Paper on Aging Society,
Survey of Health and Welfare Administration,
Survey of Living Conditions, Cabinet Office

Ratio of households comprising people
aged 65 or older (right axis)

40

20,93016,82830
20

10,817

5,000
0

10

1990

2002

0

2012

To meet the needs of elderly customers for “small but healthful meals,”
Lawson is devoting more resources to sales of nutritionally balanced
pre-cut vegetables and prepared food products in small packages. It
has also launched an initiative to expand the number of stores selling
pharmaceutical products and providing informal health consultation
services. We are continuing our efforts to keep personnel employed
past the age of 60 as a means of contributing to creation of a social
environment in which senior citizens are not isolated.

Decrease in number of retail stores

Contributions to the local community as a neighborhood store
We are engaged in building a “neighborhood store” service structureoffering food and daily necessities that respond to the needs of senior
customers who lack the means to travel long distances to shop as wellas those of busy customers with time constraints. To provide easily
accessed customer convenience, LAWSON stores have introduced
home delivery services for fresh food items and boxed lunches. Designed
to serve as emergency evacuation sites in times of disaster, the storessupport their communities as components of the social infrastructure.

200
150

159

100

130
78

50
0

1991

2002

2012

Source: Ministry of Health, Labour and Welfare

50
40
30

0

39.2

30.9

21.8

10

1991

2002

2012

Source: The Japan Meteorological Agency(change in average from 1981 to 2010 [˚C])

0.5

Deviation from each year’s
average temperaturebase level5-year moving average
deviation
Long-term change trend
The base level is the
30-year average from1981 to 2010

Trend = 0.70 (˚C/100 years)

0.0
–0.5
–1.0
–1.5

1890 1900

1910

1920

1930

Revitalizing society by enabling female
employees to flourish in the workplace
Helping customers to use time efficiently by
reducing time and labor spent on housework
Promoting a workplace environment with agood balance between work and childbirth/child rearing

Encouraging healthy eating habits among
elderly customers
Contributing to extension of a healthy life
expectancy
Increasing the number of healthy elderly
citizens

Providing greater convenience for elderly anddisadvantaged shoppers
Serving as part of the community
infrastructure to revitalize local society
Contributing as a component of social
infrastructure in times of disaster

1940

1950

1960

1970

1980

Placing the highest priority on helping customers maintain their health throughthe food products it provides, Lawson continues to develop stores andproducts with a focus on customer health enhancement. These efforts include
offering food products that enable customers to make health-conscious
meal selections and developing stores with a healthcare orientation. We
are working earnestly to further promote customers’ health by offering
pharmaceutical products, opening stores with dispensing pharmacies on thepremises and deepening our cooperation with local municipalities.

Helping to raise health awareness toencourage self-health management
Promoting preventive and advanced medicalcare services
Contributing to curbing the nation’s medical
costs

Addressing environmental issues from every perspective

Deteriorating environmental problems
Average annual global temperature deviation
1.0

Lawson’s Impact (Outcome)Product and store development to enhance customers’ health

Rising medical bills
Medical bills (trillions of yen)

20

Customers

Support for senior citizens

Retail stores (tens of thousands)

Source: Commercial statistics and economic census data

(Part-time andtemporaryworkers)

FranchiseownersShareholders

Double-income households(tens of thousands)

Local
communities

Employees

Lawson Initiatives (Output)

Single-person and two-person Source: Comprehensive Survey ofhouseholds (tens of thousands)
Living Conditions, Ministry of Health,Store crew

1990

2000

2010

2020 (Year)

Note: While the sources of the numerical data employed for the above graphs vary, certain government data are based on the Population Census of Japan. Since the census is conducted
once every five years and 2012 is the latest year for which figures are available, the graphs were created to conform.

We seek to address environmental issues by all available means,including adoption of energy-efficient store equipment, use ofinnovative, lightweight packaging materials, construction of a wasteminimizing manufacturing platform, introduction of highly efficientdelivery methods and expansion of our offering of eco-friendly products.
We will continue to adopt new environmental and energy technologies
such as solar power-generation systems to contribute to creation of asustainable society.

Helping to reduce the challenges posed byclimate change
Disseminating environmentally friendly
lifestyles
Promoting the diffusion and expansion ofleading-edge environmental technologies

07Message from the PresidentInterview with the President

Responding proactively to changes in our communities

Pursuit of sustainable growththrough new value creation

08

Lawson seeks to realize its Corporate Philosophy of“Creating Happiness and Harmony in Our Communities”
by operating neighborhood stores centered on its chainstore development and operation in Japan.
Since opening its first store 40 years ago in June
1975, Lawson has evolved in response to changes
in lifestyles and the social environment, resolving
inconveniences that arise in its communities. We feel thatthe role of Lawson has become increasingly vital withsuch changes as the aging population and increasing
participation of women in the workforce.
We intend to strengthen our convenience store
operations in fiscal 2015, the fiscal year ending February
2016, to achieve sustainable growth in a severe market
environment by treating this as a “year for consolidating
our foundation.” Our efforts will involve implementing
structural reforms based on three strategies:“strengthening our store capabilities,” “improving our
product offering,” and “providing better support for
franchise owners.” We are also upgrading our productoffering to meet proliferating healthcare needs andintroducing home ordering and delivery services forcustomers who find it inconvenient to go out for shopping.
In these and other ways, Lawson will establish aframework, in cooperation with our franchise owners, thatearns the appreciation of customers in our communities.
Lawson and its Group companies will increase theircorporate value further while continuing to maintain aharmonious relationship with society as essential social
infrastructure for our communities.
Genichi Tamatsuka
President and CEO
Representative Director

Please begin by reviewing Lawson’s fiscal
2014 business performance.

What role do convenience stores play in ourchanging society?

We faced a severe operating environment in fiscal 2014, thefiscal year ended February 2015, with competition intensifying
in the convenience store industry and polarization of consumer
trends following the consumption tax hike. We neverthelesssucceeded in improving our consolidated operating profit
from the previous year. We continued efforts to expand ourcustomer base by maintaining a product offering matchedto customer needs, while increasing our offering of over-thecounter fast-food services such as fried foods and freshbrewed coffee to improve our gross profit margin. We also
opened 1,010 LAWSON stores, acquired the SEIJO ISHII
CO., LTD. food-lifestyle supermarket chain and purchased
United Cinemas Co., Ltd. to reinforce our entertainmentrelated operations. A change in the depreciation method also
impacted our results by leading to a consolidated operating
profit of 70.4 billion yen, an improvement over the previous
year. Appropriation of an extraordinary loss associated with
the LAWSON STORE100 restructuring plan resulted, however,in consolidated net profit of 32.6 billion yen, a year-on-year
decline, and an ROE of 13.0%.

We expect to serve primarily as a neighborhood store. As
stores that operate 24 hours a day in people’s neighborhoods,
convenience stores represent a business model for providing
customers with a high degree of convenience in terms ofboth time and distance. Traditional shops selling fruits andvegetables, books and daily necessities have receded fromthe landscape in Japanese communities in recent years. The
number of small retailers in the country, including privately
owned stores, has fallen from 1.5 million or more in the 1980s
to fewer than one million today. The role of convenience storesis expanding year after year, meanwhile, since they appeal
to customers such as busy working women who have little
time for shopping and elderly people who want to shop withinwalking distance of home.
As a manufacturing retailer based on a small commercial
area model, Lawson tailors its product offering to individual
communities by leveraging collaboration between its raw
materials procurement departments and the marketing
departments responsible for analyzing Ponta card data. This
enables us to develop original products that provide added
value from the customer’s perspective. Going forward, we
will continue responding to our communities’ changing needsin such ways as assuming more supermarket functions byproviding a wider product offering, introducing more healthcarefocused LAWSON stores that contribute to health and wellness
by handling over-the-counter medicines (non-prescription
drugs), and offering home ordering and delivery services.

What business strategies are you pursuingthis year?
The convenience store market is expanding in response
to demographic and other social changes, and the role ofthe neighborhood store in small service areas is increasing.
The accelerated rate of new convenience store openings is
intensifying competition among companies in the industry.
These circumstances make this year particularly
significant. We are laying a firm foundation for continued
growth by pursuing three structural reform strategies:“strengthening our store capabilities,” “improving our productoffering,” and “providing better support for franchise owners.”
Building on this foundation, we will strengthen our activities toensure a unique, “only at Lawson” experience.

The Three Essential Practices
Strengthen store
capabilities.

Improve theproduct offering.

Provide better support
for franchise owners.

Responses to changes in our communities
Pursuit of the essentially Lawson
Fresh cooking,added timeand effort

Improvingcommunity
healthDaily lifestylesupportClose tocustomers

Community
entertainment

What are some specific undertakings
strategies you plan to execute for fiscal 2015?
We will be reinforcing our foundation as a convenience store
business through structural reforms aimed at “strengthening
our store capabilities,” “improving our product offering,” and“providing better support for franchise owners.”
Specifically, we are accelerating implementation of a
new franchise contract introduced in 2012 in accordancewith the basic policy of “strengthening relationships withfranchise owners to grow and evolve together,” under which
headquarters covers a portion of franchise stores’ electricity
bills and disposal losses. The new contract is also being
implemented for existing stores that have not yet renewed theirfranchise contracts with us. Thus, headquarters is sharing morerisk with franchise stores in an effort to establish a framework
for increasing earnings further. A semi-automatic orderingsystem taking Ponta card membership data for individual stores
into consideration will be introduced to match the productoffering to their customer demand. As concerns products, wewill respond to the diversifying needs arising from the trend
toward polarized consumption by providing a balanced offeringof standard convenience store items, such as reasonably priced
boxed lunches, and high added-value products prepared withstrict attention to raw materials.

09Interview with the President

Please tell us more about your productplanning.

10

We are upgrading the standard items we carry to meet frequent
demand, centered on such fundamental categories for ourbusiness as boxed lunches and rice balls, pasta and salads. We
will also reinforce our ability to compete with supermarkets bydeveloping cut vegetables that can be eaten without washing,renewing our private Lawson Select brand and expanding ourrange of daily delivered and frozen foods. We will continue
our efforts to enhance our selection of over-the-counter fast
foods prepared with strict attention to high value-added raw
materials, as well as our MACHI café and Machikado Chubo(in-store kitchen) food offerings. We will also enrich our lineup of
health-oriented merchandise, such as low-carbohydrate branbreads and healthful confectioneries with reduced calories andgreater nutritional value. As concerns advertising and sales
promotion activities, meanwhile, we will increase their budgets
compared with the previous term and seek ways of explaining
our enhanced product offering to customers.
We celebrated our 40-year anniversary by initiating the“Passionate and Delicious” project aimed at reexamining
our Companywide product manufacturing starting from thefundamentals. In June, the month marking 40 years since
our establishment, we introduced commemorative products
prepared with strict attention to raw materials and recipes,
which were warmly received. With today’s customers expecting
convenience stores to serve as neighborhood specialty foodshops offering more than convenience, Lawson will continue its
efforts to satisfy them through this kind of product development.

The “Passionate and Delicious” project

Are you planning any further capital
investment in your existing stores?
Yes. We will begin with investment in about 2,000 stores, mainly
in residential areas, by installing more refrigerator and freezer
cases and raising the heights of the product display shelves.
We will strengthen our product offering in categories such as
milk and yogurt, prepared meal products in the Lawson Selectseries featuring dishes such as boiled fish packaged in small
portions, and frozen food items that make convenient side
dishes in boxed lunches. We consider it important to support
customers in their daily lives by providing an appropriate
selection of “foods people eat every day and items people use
every day.”For the past two years, we have been increasing thenumber of stores offering MACHI café services. Now that they
are available in nearly all the stores, we are following up by
introducing Machikado Chubo in-store kitchens, which we
expect to be operating in 3,600 stores by the current fiscal
year-end. Expanding the kitchen facilities at existing stores has
equipped us to serve such customer favorites as freshly madepork cutlet sandwiches, pork cutlet curry, and rice balls, aservice that has proved popular with customers across a broad
range of age groups.
Our investment in energy conservation will also continue.
We will proceed with the introduction of advanced energyefficient “freezing and refrigeration systems employing
cloroflnorocarbon (CFC)-free CO2 refrigerants” to lower electric
power consumption by the stores. Annual CO2 emissions
by stores using these systems are reduced by about half
compared with stores using conventional equipment, andelectric power consumption by individual stores can be cut by
about 12%. Our medium-term target is to achieve a per-store
reduction in electric power consumption of 20% in fiscal 2020
compared with fiscal 2010 through activities of this kind.

What issues do your stores face, and what
solutions can you offer?
One question we ask is whether customers find what they
are looking for when they come to a store. We have foundthat LAWSON stores still do not meet all our customers’
expectations. We need to improve the skills of our supervisors
who provide individual support for franchise owners at theirstores. We will also review the mechanism employed by storesfor product order placement. The planned order-placement
system for soft drinks and processed foods will be renewed,
and a semi-automatic ordering system will be introduced forsuch products as boxed lunches, rice balls and sandwiches in
the ready-made food category.
Semi-automatic ordering is a mechanism for providing
recommendations on product and order quantities based on
the purchasing behavior of Ponta members, who accountfor about 50% of sales, with a variety of other data taken
into account. This might include, for example, data on recent
sales trends at individual stores and purchasing by frequentcustomers, for example, as well as information from otherstores with similar customer bases, weather forecasts andsales campaign information. In addition to these highly
accurate recommendations, franchise owners may consider
such special factors as upcoming community events indetermining ordering quantities.
After experimenting with semi-automatic ordering
for about three years at several hundred stores, we havedetermined that the accuracy of its demand forecasting has
improved sufficiently to justify extending it to all the stores within
the current fiscal year. Introducing the system not only results inimproved ordering accuracy, moreover, but it also contributes
to more efficient store operation. By dramatically reducing
the time required for order placement, it will free up time forstore managers to focus greater attention on such matters as
sales floor enhancement and staff training. The significance ofshortening the time spent on ordering is evident from the trend
toward an increase in time required for such other tasks as
preparation of Kara-age Kun fried chicken and other over-thecounter fast foods and provision of MACHI café and Machikado
Chubo in-store kitchen services.

What are your differentiation strategies for the
future?
First, we are pursuing health-related activities. We are forming
strategic business partnerships with various regional drugstoresand pharmacies, especially, to respond to the health andwellness needs of our communities. Since 2013, we have been
opening stores with a health and wellness focus that carry some
5,000 over-the-counter medicine and cosmetic products anddaily necessities, or about twice the number LAWSON stores
normally handle. We plan to expand these efforts in the future.
We are also stocking such products as low-carbohydrate
bran bread and nutritious confectioneries in LAWSON storesnationwide. Another example of the ways in which Lawson willremain a step ahead in the next generation is the “Care-focused
LAWSON for Senior Citizens,” a program offering nursing careconsultation windows, salons and other services we introduced
in 2015.
A second new direction we intend to pursue is home
convenience operations. We will evolve a step beyond our identity
as a neighborhood store and move closer to our customers
by going the final mile. We concluded a business partnershipcontract with SG HOLDINGS CO., LTD. in April 2015 andannounced our plan to establish a joint venture. We will leverage
our nationwide network of over 12,000 stores and the highvolume distribution capabilities of such home delivery services
as SAGAWA EXPRESS CO., LTD. and other companies in the
SG Holdings Group to introduce home ordering and delivery
services centered on LAWSON stores. These activities willcontribute to establishing a firm foundation for a next-generationhome convenience business, both by employing the electroniccommerce business operations of Lawson Fresh and otherGroup members and by implementing an open platform strategy
to invite participation by other Internet shopping services.

How does Lawson approach corporate
governance and shareholders’ returns?

officers, for example, who have formed a Nomination andCompensation Committee comprising only outside directors toreport on issues related to candidate selection and directors’compensation. The six outside officers, some of whom areoutside corporate auditors, have experience in a wide range offields, including business management, academics, accounting,law and the public sector. Four of the outside officers are women,
whose selection reflects our efforts to diversify management.
As concerns shareholders’ returns, we consider
maintaining sustainable stable dividend increases to be afundamental responsibility of management. We will pay a
dividend of 245 yen per share in fiscal 2015, an increase of 5
yen from the previous year.

Finally, please say a few words about yourhuman capital development.
Lawson promotes development of self-motivated, innovative
employees as requisite human capital for achieving sustainablegrowth through value creation. We are recruiting more female
employees and foreign nationals to enhance diversity andincrease the receptiveness and flexibility of our organization. We
will continue to value employees who take on work outside theirsphere of responsibility and undertake initiatives proactively inaccordance with our objective of creating an organization of
disciplined, self-motivated people.

We have been quick to establish a dynamic, highly transparent
corporate governance framework. Over one-third of themembers of our Board of Directors are outside independent
Roadmap to sustainable medium-term growth and a 20% ROE

Gross operating
profitAnnual net increasein number of stores: 5%

Non-consolidated
LawsonSelling, general andadministrative expenses

Consolidated operating
profit 100 billion yen

ROE 20%
Increased dividend /Buy-back & cancellation

Consolidated
subsidiaries

Gross profit atexisting stores

M&A/alliances

11

Message from the CFO

Targeting improved capital efficiency and a 20% ROE

Yutaka Yoshitake
Executive Vice President,
Chief Financial Officer

Review of fiscal 2014

12

Plans for fiscal 2015
As concerns fiscal 2015, we are targeting 71.0 billion yen
in operating profit and 35.2 billion yen in net profit. Viewing
this as a year for consolidating our foundation for sustainable
Fiscal 2014 (consolidated)(Millions of yen)Feb. 2015

Gross operating revenues
Operating profit
Recurring profit
Net profit

+2.6%
+3.5%
+4.1%
–13.9%

497,91370,482
71,71432,687

Feb. 2014
485,248
68,12768,88037,966

Cash ﬂow planning
We plan to attain operating cash flows of about 100 billion yen,investment cash flows of about 80 billion yen and free cash flows
of about 20 billion yen in fiscal 2015. We expect our investment
cash flows other than that portion intended for investments andadvances to increase by about 20 billion yen from the previous

and other business plans. We will not simply pursue expansionof scale but will strictly review the return on investment (ROI)of each. Our corporate management is also clarifying its graspof the ROI from individual investments to facilitate objective
determination of the potential for appropriate returns fromdomestic store openings and other future projects. Our
acquisition of Seijo Ishii last year, for example, was conductedfollowing exhaustive discussions involving outside directors.
These concentrated on determining whether future cash flows
from operating the business would provide a proper balancewith the enterprise value, including not only the cost of stockacquisition but interest-bearing debt as well.

ROE and capital discipline
As a public company, we must make an appropriate allocationof capital to implement our management strategies and tocontinue creating value through our neighborhood store
business model. We intend to increase our earnings ratio toa level exceeding our capital costs and to continue providing
appropriate returns to shareholders. We have set an ROE of
20% as a medium-term target for our management benchmark
to optimize our use of shareholders' equity. Improving capitalefficiency by implementing financial strategies is one approachto achieving a high ROE, but we consider increasing profitability
by augmenting the operating cash flows from our main business
operations most vital. We have identified earnings growth fromour main business operations as our first priority, and we areconducting a balanced allocation of cash flows that provides
for optimal reinvestment over the medium term while achieving
shareholders’ returns primarily through distribution of dividends.
In order to maximize corporate value for our shareholders,
we have implemented strong discipline to ensure a reasonable
return from our investment when considering store openings

Improvement of enterprise value andshareholders’ returns
As concerns shareholders’ returns, our intention of achieving
sustainable increases in dividends over the medium and longterm remains unchanged. As a result of a comprehensive review
of our business plan, which includes concentrating investment
in our main business operations to improve our franchiseowners’ profits, we plan to distribute 245 yen per share as anannual dividend for fiscal 2015, an increase of 5 yen from the
240 yen per share dividend paid in fiscal 2014.
We will maintain lasting relationships with our franchise
stores through continued unified efforts to improve ourcustomer satisfaction rating by “strengthening store
capabilities,” “improving the product offering” and “providing
better support for franchise owners.” We expect to pay
stable, attractive dividends to our shareholders while ensuring
maintenance of the Company’s financial health.

ROE comparisons

Changes in ROIC*1 over 10 years compared with competitors(%)

Average ROIC for the period (%)

25.0

20.0

Wal-Mart
20.0

ROE (Fiscal 2014*)

Lawson’s consolidated operating profit grew by 2.3 billion yen
from the previous year to 70.4 billion yen in fiscal 2014, the fiscal
year ended February 2015. Existing store sales in our mainstay
domestic convenience store business declined by 1% comparedwith the year before, but operating profit turned upward,
boosted by attainment of a gross profit margin of 31.3% on astore basis — an improvement of 0.3 percentage point. This
improvement reflected the influence of a 9.4 billion yen gainfrom a change in our method of depreciation from the decliningbalance method to the straight-line method. Net profit for theyear nevertheless fell by 5.2 billion yen from the previous year to
32.6 billion yen due largely to appropriation of an extraordinary
loss in the amount of 4.2 billion yen associated with the
LAWSON STORE100 restructuring plan. ROE registered 13.0%
as a result. We opened a total of 1,010 domestic LAWSON
stores (a net increase of 588 stores after closures are factoredin), boosting the total to 12,276 stores as of end February 2015.

future growth, we plan to implement concentrated strategic
investments and assume additional costs to improve theprofitability of the franchise stores. We anticipate a resulting
reduction in operating profit in our non-consolidated business
operations. Our consolidated operating profit is projected torise, however, as the business performance of the SEIJO ISHII
CO., LTD. food-lifestyle supermarket chain we acquired in
October 2014 and other new businesses is consolidated overthe full fiscal year. We expect to gain 4.9 billion yen in operating
profit from Seijo Ishii and an additional 1.1 billion yen from
United Cinemas Co., Ltd.
In our non-consolidated business operations, existing
store sales should recover to their previous-year level. We aim toachieve this through structural reforms implemented in pursuit of
our three structural reform strategies: “strengthening our store
capabilities,” “improving our product offering,” and “providing
better support for franchise owners.” We plan to open 1,200
stores, moreover, a number of which will be conversions of stores
obtained through new business alliances, while maintaining ourpriority on store profitability. This will be partially offset by 450
closures of LAWSON stores, a reflection largely of proactive
removal of stores to more promising locations, and 300 closuresof LAWSON STORE100 stores under the LAWSON STORE100
restructuring plan. The result will be a net increase of 450 stores.
As concerns gross profit, we are targeting 31.5%, an
improvement of 0.2 percentage point compared with theprevious year. Measures to deal with the ongoing depreciation of
the yen since last year and rising raw materials prices will centeron optimal deployment of our subsidiary SCI, Inc., a specialistin supply chain management. It will implement dynamic raw
materials procurement and transition to domestically produced
raw materials in an effort to curtail increases in the cost rate.
We will also expand our profitable over-the-counter fast-foodservices with the aim of improving our gross profit margin.
At the same time, however, we expect to see a strategic
year-on-year increase in selling, general and administrative
expenses of 5 to 10%. Factors contributing to this rise include
a significant increase in franchise store support costs stemmingfrom our accelerated extension of our new franchise contract
to some 2,000 additional stores. Under the new contract,
headquarters provides greater support for franchise stores byassuming part of the cost of their electricity consumption anddisposal losses. Other factors include a planned increase inadvertising and promotional expenses in excess of 2 billion
yen from the previous year. Media exposure will be raised topull more customers to the stores by publicizing our improved
product offering.

year due to the new store openings in Japan as well as facility
and equipment upgrading at existing stores.
In the longer term, if we maintain our current rate ofstore openings, we can expect annual operating cash flows
to surpass 100 billion yen, supported by stable domestic
convenience store operations, and our investment cash flows
to transition in the range of approximately 60 billion yen to 70
billion yen. Free cash flows will rise to the 30 billion to 40 billion
yen level, which we believe will cover our financial cash flows
comprising mainly dividends.

15.0
10.0

Lawson

14.0

CVS Caremark

12.0
10.0

Average ROIC for 2 major
competitors: –3.6 percentage points

6.0

Walgreen

Seven & i

4.0
2.0
0

TargetJ Sainsbury

Tesco
10,00020,00030,00040,00050,00060,00070,00080,000250,000(Miillion US$)

Market capitalization (end fiscal 2014)*Based on data for Aug. 2014 - Feb. 2015.

0.0%

3.0%

4.0%

245 yen(5 yen increase)

(Yen)

160

70
41

41

41

2001

2002

2003

100

6.0%

(%)

5.0

Cash dividends per share (left axis)
Dividend yield (right axis)

90

5.0%

Change in number of stores *2
Notes:
1: ROIC = Operating profit after taxes (assuming a 40% tax rate) ÷ Average interim capital investment(total equity + interest-bearing debt)
2: Rate of increase in number of stores (average annual rate of increase from fiscal 2004 to fiscal 2013)
3: Arrows indicate direction of change in ROIC between fiscal 2005 and fiscal 2014.

Transitions in cash dividends per share and dividend yield

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

*3

8.0

FamilyMart

Metro

-60.0

Lawson (convenience stores)
ROIC: –1.4 percentage points

16.0

Costco

5.0
0

18.0

160

170

180

200

220

240

245

4.5
4.0
3.5
3.0
2.5
2.0

110

1.5
1.0
0.5

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015 (FY)(Forecast)

0.0

13

Outside Directors’ Perspectives

Sakie Akiyama

Emi Osono

CEO & Founder,
Saki Corporation

Professor,
Graduate School of International
Corporate Strategy,
Hitotsubashi University

Ms. Akiyama founded a company that
manufacturers robots to conduct precisioninspections of high-tech products. She has
extensive knowledge and experience asa corporate manager and has served as
an Outside Director on Lawson’s Board of
Directors since 2014.

Professor Osono is highly educated with extensive
knowledge of such matters as Corporate Strategy
and Organizational Behavior. In addition to teachingin the Graduate School of International Corporate
Strategy at Hitotsubashi University, she is a Member of
the Organizing Committee for the Porter Prize, which
recognizes unique competitive strategies. She hasserved as an Outside Director on Lawson’s Board of
Directors since 2012.

14

15“I expect Lawson will not limit its operations to Japan in the future, but will
establish a global presence based on a solid organizational structure.”
Lawson’s essential nature is a confident attitude
toward taking on challenges
One of my fields of specialization is the study of companies andbusinesses that adopt unique competitive strategies. Viewing
Lawson from this perspective, I find it interesting that thissecond company in the industry in Japan keeps seeking ways todifferentiate itself from the industry leader. How can we reveal our
raison d'etre, and how can we encourage customers to choose ourstores? These objectives are among the bases for our discussions.
To achieve these goals, Lawson has taken up the challenges
of establishing new types of stores with the NATURAL LAWSON,LAWSON STORE100 and healthcare-oriented LAWSON
stores. Lawson implements new approaches and management
experiments in an easily understandable manner, while trying todiscover what customers really want a neighborhood store to be.
It is Lawson’s nature to continually take up challenges, howeverdifficult, and move forward for its customers.

Clearly evident improvements in governance andgood organizational management
As concerns governance, the composition of the Board of
Directors is well balanced, discussions have become more active,
and significant improvements have been made over the past
several years. With respect to decision-making at Board meetings,
the reasoning, decision-making process and prospects are clarified
in a manner that makes verification and objective assessment
relatively easy. Lawson discloses information proactively anddevelops factors such as business models, mid- to long-term plansand personnel data in considerable detail.
Organizational theory is another focus of my research. I findthat Lawson is a thinking organization. President Tamatsuka is a
corporate executive who values organization-based management
and who involves himself in inspiring the exercise of individualand organizational abilities. It is his custom to identify the rootsof problems in the organizational structure and to solve themby altering the mechanism. This means he does not rely on a
personal, individualized approach to solving problems.

Lawson to become competitive in the global
marketplace
As I mentioned, Lawson does face issues that require solution.
First, it is essential that it maintain conditions in which the franchiseowners can conduct and develop their business without worries.
Moreover, I hope to see Lawson remain a reliable company fromboth the internal and external perspectives so that everyone
concerned, including store crew, suppliers and headquarters
employees, can feel that they are participating in creating value.
In terms of diversity, the ratio of women who return towork after their maternity and childcare leaves and the ratio ofmen who take childcare leaves is quite high at Lawson, and thecompany has set a target of having female personnel fill 30% of its
managerial positions in 2020. This reflects a high awareness of thevalue of human capital. At present, the female directors, including
myself, are all external officers. I hope many female Lawson
employees will seek higher positions and raise the ratio of female
officers. Lawson is also actively hiring foreign nationals, creating
the kind of organizational diversity that is essential for a company
to gain a competitive advantage, both at home and abroad.
I look forward to seeing the number of Lawson fans increaseas the Company takes on a progressively more global character.

“I am impressed by Lawson’s focus on each individual store, with its close evaluationof the genba, genbutsu and genjitsu (actual site, actual objects and actual facts).”
Deriving confidence from active discussions andeffective governance
Under a new system implemented by President Tamatsuka,
meetings of the Board of Directors are forums for active discussion.
Corporate management must not only develop strategies but
also identify risks and determine the effectiveness of policies. It
is essential to execute decisions and show the results in figures.
The flexible atmosphere of Lawson’s Board of Directors invites
members to speak without hesitation. I share Lawson’s Corporate
Philosophy and objectives with the other Board members, while
also offering frank opinions from the standpoint of an external
company’s CEO.
Lawson has always been forward-looking in its governance.
Japan's Corporate Governance Code was instituted in June 2015,
and many companies are still in the trial-and-error stage. Lawson,on the other hand, is already at the stage of conducting truly
effective governance. The appointment of external board members
is not simply a matter of number juggling. It is prerequisite that they
participate actively in Lawson’s Board meetings, offering opinions
and enhancing its functionality.

Detailed personal responses revealing Lawson’s true
natureLawson operates as a manufacturing retailer based on a small
commercial areas model. This means handling production andlogistics as well as operating stores. As a person engaged
in manufacturing or, more specifically, the automation of
manufacturing, I perceive many issues related to efficiency. At thesame time, however, the business involves product development
and services from the customers’ perspective, which require thepresence of people at the center of the operations. I hope Lawson
will retain its special nature by continuing to offer attentive personal
responses while upgrading its efficiencies through automation.
As an officer of a manufacturing company, I focus on theactual site, actual objects and actual facts, as I said, but President
Tamatsuka goes back to basics and focuses on the stores, which
are the contact points with customers. This may not be special, but
it is certainly meaningful. For individual customers, the LAWSON
store where they shop is all they know about Lawson. So we mustask how we can improve the individual stores. I support Lawson’s
policy of focusing on its stores, which serve as the basis for theretail business.

Becoming a genuine top brand by “Creating
Happiness and Harmony in Our Communities”
Ways of doing business will change in the face of social issues
such as the aging of society and declining population. The simple
concept of expanding the number of stores to raise the competitive
advantage does not always work in an environment with acontracting workforce. As consumer behavior changes, it will
become increasingly necessary to satisfy local community needs,
rather than offering the same products nationwide.
Will Lawson be able to continue offering new value as an
essential part of the lives of community residents in times ofincreasingly diversifying needs? It will be important for the Boardof Directors to discuss both the major strategies and the meansof satisfying them. I believe that Lawson will become a genuine
top brand by developing as a company in which every member
considers what he or she can contribute to community happinessand harmony.

Financial and Non-financial Highlights

Financial Highlights
Net Sales for all stores /Operating profit ratio(

As percentage
of all stores’
net sales)

Operating margin

Net sales for all stores(right axis)(left axis)(As percentage of all stores’ net sales)(Billion yen)

2,000

1,825.8

Net profit(Billion yen)(Billion yen)

80

40

(%)

1,961.9
1,906.5 1,945.3

4.0

66.2

68.1

Net profit per share

Return on equity (ROE)
Return on assets (ROA)

3.5

3.6

3.5

3.4

60

400

37.9

Operating profit

380

ROE

70.4
33.1

32.6

332

30

55.5

3.5

ROA

16.1
255

24.8

16.0

249

40

20

13.0

15.2

12.8
12.0

200

12.0

3.0

1,000

8.0
2.5

500

20

10

Operating profit for the fiscal year ended February
28, 2015 amounted to 70.4 billion yen, registering
year-on-year growth for the second consecutive
year. The operating margin improved further (as apercentage of all the stores’ net sales) as Lawson
continued to reinforce its existing domestic storesin a highly competitive operating environment. The
Company is targeting consolidated operating profitof 100 billion yen in the medium to long term.

(%)

20.0

327

300

25.3

3.3

Guide

(Yen)

61.7

1,682.8
1,500

Operating profit

5.5

100

6.0

6.3

2012

2013

Gross profit margin
The gross profit margin for the year under review
was 31.3%, an increase of 0.3 percentage pointcompared with the previous year, as the Company
expanded sales of over-the-counter fast foods, astrong product category with a high gross profit
margin, and leveraged the contributions of its
specialized subsidiary SCI, Inc. in promoting overallvisualization and streamlining of the supply chain.

4.7

4.9

4.0

0

2010 2011 2012 2013 2014 (FY)2.0

Net assets

0

Existing store sales /Gross profit margin(Billion yen)

250.4

208.4

Gross profit
margin*

(Yen)

(%)

100.8

105.4

100.0

100

200

99.8

11,13099.0
10,000

9,994

(%)

240

250

12,38320112014 (FY)

Lawson share price *TOPIX *

1

(Yen)

2

10,000100

220

11,606

10,457

8,000

200

200

170
66.8

150

80

180
72.2

80

6,890

73.4
60.2

7,060

6,000

57.9

60

4,780
4,000

100

5,000

30.1

30.6

30.5

31.0

100

40

50

20

3,885

31.3

2,000

20

0

0
0

2010 2011 2012 2013 2014 (FY)

2010

2011

2012

2013

0

2014 (FY)*Gross profit margin represents margin at store level.

02010 2011 2012 2013 2014 (FY)2010 2011 2012 2013 2014 (FY)02010 2011 2012 2013 2014 (FY)*1	The Lawson share price is the closing price on February
28, 2015, the last day of fiscal 2014.
*2	Figures in the graph of the Tokyo Stock Price Index(TOPIX) indicate percentage changes from 951.27, theclosing level on February 28, 2011.

*Combined total of domestic convenience stores(including Group company stores) and Seijo Ishii
stores (directly-operated Seijo Ishii stores only)

ROE
ROE stood at 13.0%, which was lower than it had
been but still a high level, as the Company incurredan extraordinary loss resulting from its LAWSONSTORE100 restructuring plan. We are targetinga medium-to-long-term ROE of 20% throughearnings growth by our core businesses.

Dividend

4,025

60

40

2010

Share price

Payout ratio (right axis)

Annual dividend (left axis)

15,000

120

214.6

0

2010 2011 2012 2013 2014 (FY)

Annual dividend per share /Payout ratio(Stores)

Net sales for existing
stores (YoY)

230.1

16

0

2010 2011 2012 2013 2014 (FY)No. of stores in Japan

300

263.7

0

2010 2011 2012 2013 2014 (FY)The Company distributed a dividend of 240 yen
per share, an increase of 20 yen compared withthe previous fiscal year, raising the payout ratio
to 73.4%. Management plans to pay a per-share
dividend of 245 yen, an increase of 5 yen, forthe current fiscal year. It intends to maintain strict
capital discipline and return profits to shareholders
in a stable, sustainable manner through dividend
distribution and share price performance.

Non-financial Highlights
Per-store electricity consumption (index)
and carbon dioxide (CO2) emissions
Annual electricity consumption (left axis)
CO2 emissions (right axis)

(%)

100

Base year

Target
20% reduction
88.8

100.0
91.1

80
60

101.2

80.0

Ratio of working mothers to all
female employees
Number of working mothers (left axis)
Ratio of working mothers to all female employees (right axis)

(%)

50

44.7

(t-CO2)

120

40

22.2%
Up

100
80

(Persons)

(%)

125

25

107

100

(%)

40

22.2
100

8.4

51

10

29.4
94

40

40

10
20

20

0

0

2010

2014

2020 (FY)

Determined to reduce electricity consumption,
we set a medium-term energy-efficiency goalof “reducing per-store electricity consumption
by 20% by fiscal 2020 as compared to fiscal
2010.” In fiscal 2014, the Company’s electricity
consumption was down 8.9% from fiscal 2010,
an achievement made possible by installation ofenergy-efficient equipment and replacement ofexisting stores’ facilities.

0252007 (Base year)

2014

(FY)

Seeking to make effective use of surplus foodand respond to the Food Recycling Law, wehave worked to improve our food-recycling ratioby 2 percentage points or more each year (using
22.5 percent for fiscal 2007 as the base). As
a result, we achieved a ratio of 44.7% in fiscal
2014, well above the statutory target of 36.5%.

0

4.6

5

23
10
2001

2005

2010

2014 (FY)0

Our childcare support policies have contributed
to raising the ratio of working mothers to all
female employees by 13.2% over the past 13
years. The ratio of employees returning to work
after childcare leave is also a high 97.1 percent(cumulative basis since fiscal 2000).

50

31

40

Outside directors
67%

33%

30

56
20.9
73

48

20

40
20
Outside directors
10

20

18%

Independent
officers

50%

10Female directors

27
0

2011

2012

Femaledirectors

30

60

76

Ratio of female directors to all
directors(%)(%)(Persons)

32.8

Ratio of outside directors to all
directors
80

200

15

67
50

Males
Females (left axis)
Ratio of newly hired foreign national (right axis)

150

17.8

75

20

Numbers of new male and female
employees and ratio of newly hired
foreign nationals

20

16.0

30

22.5
60

68.2

Food-recycling ratio

2013

2014 (FY)0Among new hires, half are women and 20%
to 30% are of non-Japanese nationality. We
promote diversity by consciously maintaining
these ratios.

0

2000

2014

(FY)

The number of outside directors has been
increased as a percentage of all directors toacquire the benefit of their extensive specialized
knowledge and diverse backgrounds. Their
presence enables the Board of Directors to
examine the reasonableness of the Company’sbusiness execution and oversee its lawfulness
from an independent, objective standpoint.

0

0％
2000

2014

(FY)

We have directed earnest efforts to raising
the ratio of female directors on our Board of
Directors in accordance with our priority on
diversity in our operations. We will continue
to leverage the woman’s perspective in ouroperations based on an awareness of its
necessity to expansion of our customer base asa foundation for future growth.

17

Supporting Daily Lives

Toward a community full of smiles
Lawson’s Corporate Philosophy, “Creating Happiness and Harmony in Our Communities,” is an ideal sharedby everyone everywhere. Lawson will continue contributing to community happiness and harmony byproviding “what you want, when and where you need it.”Decreasing
number of
nearby stores
Decrease in retail stores:
Compared with 1996

Empowermentof women

Rapidly aging
society

Rise in healthconsciousness

Increase in double-income
households: Compared with 1996

Increase in population aged 75
or above: Compared with 1996
Expected increase rate in 2025

Medical costs:
Compared with 1996
Expected increase rate in 2025

374%

115%

30%

272%

Diversiﬁcation of community needs
Every
day

Enjoyment

HealthTime &
distance

SpecialpreferenceHomedelivery

Refer to page 6 for details.

“I want a store where I
can buy prepared foodin the morning or on
my way home.”18“I think I caught a cold. Luckily,
I was able to get medicine at a
nearby LAWSON store.”“I want to buy daily
necessities at the same time
so I don’t have to visit anotherstore when I’m busy.”

Delivering Coffee from the Bean to
the Customer’s Tumbler

Go to P20

Seeking to Maintain and Promote
Customers’ Health

Go to P22

Bringing Convenience andPleasure to Daily Life

Go to P24

Enriching Lifestyles through theEntertainment Business

Go to P26

Developing Stores and Business Approaches
Go to P28
to Better Meet Customers’ Speciﬁc Needs
Growing with Franchise Stores
under a New Franchise System

Go to P30

“LAWSON delivered food to me,
since I couldn’t go shopping.”“We’d like to prepare a simple dinner thisevening, but it has to be healthful food.”

19“LAWSON sells
safe and reliable
vegetables that makeus feel secure.”“LAWSON stores issue
tickets on the spot!!”“We want small
portions of precooked main dishes.”“These boxedlunches and riceballs we’re eating in
the park are great!”“I’m looking forward
to a beer with snacks
before dinner!”

Fundamentals of store operation is the key
Lawson seeks to create happiness andharmony in communities by following“The Three Essential Practices” as thefundamentals of store operation forenhanced customer satisfaction.
Keeping the store clean inside and out
creates a store environment that attracts
repeat customers while contributing toa clean community. Lawson believes
that efforts of this kind at every store willaccumulate to contribute to environmental
conservation throughout society.

“We just want to take a breakfrom housework!”

The Three Essential Practices
Serving
customers
courteously

Keeping
our stores andcommunities
clean

Providing aquality productoffering that meets
communityneeds

Lawson wants to realize storesthat help communities by serving
customers courteously, including
serving coffee personally topromote communication.
Lawson develops products thatmeet customer needs by analyzing
purchasing data for over 68 million
Ponta members (as of February
28, 2015). It also realizes a productoffering tailored to the needs ofspecific communities by allowing
individual stores to order products
matched to their customer base.

Lawson will create happiness and harmony
across borders in communities worldwide.
Growing Asian nations are experiencing an increasingneed for convenience to save time in the context ofchanging lifestyles. We are certain the Japanese-style
convenience store will play a significant role in theseemerging nations as well as in Europe and the UnitedStates.
Lawson will design stores to win the hearts ofcustomers in every local community by grasping theneeds of small areas, despite differences in cultures andchallenges depending on the country and region. We will
put smiles on the faces of people in every community inwhich we operate across borders.

Beijing

DalianJapan

Chongqing
ShanghaiThailandPhilippines

Indonesia

Hawaii

Delivering Coffee from the Bean to the Customer’s Tumbler

Grand Fantasista* members

A warmhearted
MACHI café brew

Warmhearted service by Fantasistas
Store crew with a certified rich knowledge of MACHI café and an ability toconvey its special character and the enjoyment of coffee to customers arecalled “Fantasista.” This qualification system, under which store crew who
have passed an accreditation test conducted twice a year are certified, isunique to LAWSON. Approximately 6,000 store crew were certified as Fantasista as of February 28, 2015. Each
Fantasista member contributes to the store by providing customers in the community with satisfaction.

I feel rewarded under the Fantasista system
My Fantasista certification with extensive knowledge of coffee enables me to serve customers withconfidence. I have always liked working in the hospitality industry, and the owner has given me thefreedom to provide a tasting service I created myself. This has made my job even more rewarding.
I am fond of the MACHI café concept, which goes beyond targeting sales to nurturing humanresources to raise the overall service level.
*Grand Fantasista:
A qualification awarded to Fantasistas who satisfy strict criteria, including a store review and a screening at the branch.
Fantasistas at each branch who attain an especially high level are nominated for this honor. As of February 28, 2015,
fifty store crew in Japan were qualified as Grand Fantasistas.

20“Anywhere can be your café.”
The MACHI café fresh-brewed coffee service provided by LAWSON stores began with our desire tooffer customers a coffee break in their community. We have established two conditions for realizing thisdesire: high-quality coffee and warm LAWSON hospitality.

Data-based product development
SocialcapitalIntellectual
capitalHumancapitalManufacturing Financial
capitalcapitalProduct
development
Femalecustomer ratio

MACHI café operates according to the unique “LAWSON SCM-CRM Model.” Lawson
employs repeat rates and other data from Ponta members’ purchasing histories in its
product development. As concerns raw materials procurement, our subsidiary SCI
and a specialized headquarters division negotiate directly with high-quality coffee bean
producers. Professional servers we call “Fantasistas” hand customers a cup of coffee
warmheartedly.

60%

MACHI café: Approx.

(Companywide: Approx. 40%)High added value
Raw materials procurement

Product
development

Visualization ofopportunity losses

SCM

CRM

Supply chain
management

Customer
relationshipmanagement

Manufacturing
and logistics

Optimized
product offering

Planned ordering

LAWSON SCM-CRM Model

Original aroma and taste
produced by quality beans

Raw materials
procurement

MACHI café pursues an original coffee
aroma and taste suited to a familiar store in
the local community.
MACHI café serves high-quality coffee combining sweetness, fruity acidity anddeep richness by using coffee beans from selected farms and production areas infive countries*, where strict control is maintained over every bean up to the timeof shipment. The farms have all earned Rainforest Alliance certification, which isawarded to farms that satisfy strict criteria for environmental conservation and farmworker living standards. Only beans from Rainforest Alliance CertifiedTM farms havebeen used for the coffee and caffè latte served at MACHI café since March 2015.
*Five countries: In the case of blended coffee

Fully automated espresso machines
manufactured in Italy are customized
for MACHI café operation. As many as
16 different beverages are available,
and menu items such as caffè latteand matcha latte (green tea latte) areespecially popular with female customers.
Lawson makes a proactive investment instores that achieve good coffee sales bysupplying them with a second machine.

21

Sales

100% designated

No. of stores
As of February 28, 2015

10,000Approx.

No. of Fantasista crew

6,000

Approx.

Special roasting method that brings out originality
LAWSON stores have adopted a post-mixing method in which different varieties ofbeans are blended after roasting according to five methods suitable for each variety.
This method is time and labor intensive, but it draws out the original taste and aroma
of each variety. The result is a rich taste that satisfies customers.
LAWSON uses only raw milk* for caffè latte to assure naturally good taste.
Hot caffè latte is brewed at a slightly reduced temperature to maximize the essential
richness and sweetness of milk, moreover, while iced caffè latte employs chilled milk.
*“Raw” milk is pasteurized.

Caffè Latte

Farms/
Production areas

Ms. Yuri Kondo

Further customized Italian machines

Production

Ipanema farm, Brazil

Nishi-ku Hanahara-cho Store,
Aichi West BranchGrand Fantasista*

Five different roasting methods &use of 100% raw milk

“Bring your own tumbler”
system for discounts andenvironmental protection
LAWSON stores offer a 10 yen
discount on most beverages tocustomers who bring their own
coffee tumblers and reduce waste.
MACHI café also considers society
and the environment
in every process of its
product development.
The thin skins of thebeans removed in
the roasting process
and waste fromcoffee processing arerecycled as fertilizer
and cow bedding, forexample.

Seeking to Maintain and Promote Customers’ Health

Every
day

We put the health of our communities
first and contribute to convenient,
healthy living.

Enjoyment

HealthTime &
distance

SpecialpreferenceHomedelivery

The lifestyles of our communities are changing, and the roles played by convenience stores are changing
with them.
LAWSON stores serve as community health hubs that offer two pillars of support for customers in theircommunities: delicious meal solutions to support “health through eating” and self-medication solutions to
support “health through exercise.”

Meal Solutions

22

In 2000, the first LAWSON stores were opened insidehospitals. In 2001, we launched NATURAL LAWSON storesto support beauty and health. In the years since, we havecontinued to make health-oriented investments in new store
openings, product development and enhancement of the
product offering.
People in every generation are increasingly healthconscious today, a trend that is expected to extend into the
future. We are drawing on our accumulated expertise in thisfield to propose meal solutions that can help customers stayhealthy through the foods they eat every day. We want themto stay physically and mentally healthy by eating safe, reliable
foods without forgoing the pleasure of delicious taste.
Lawson has established 10 themes for its healthfulproduct development, including “Let’s eat veggies” and“Delicious low carb.” We are developing original healthoriented products such as salads and vegetables foreveryday consumption, low-carb bran bread developed
jointly with a manufacturer, healthful drinks and snacks
marketed under the NATURAL LAWSON brand, andnutritionally balanced boxed lunches. Sales of such healthoriented products continue to grow after exceeding 120
billion yen in fiscal 2014.

Let’s eat vegetables

Shakit! Corn salad

Tomato pasta salad

Delicious low-carb foods

Bran bread

NATURAL LAWSON Healthy Series

Green smoothie
Healthy snack series

Self-medication Solutions
Besides contributing to health through food, Lawson is developinga wide range of “self-medication solutions.” These include selling
medicine, opening new stores with long-term care providers as franchiseowners, collaborating with municipalities, and organizing sports events
to help community residents control and maintain their own health.
In the area of medicine sales, we have been developing Pharmacy
LAWSON stores since 2003 to serve our customers as family
pharmacies. As of the end of May 2015, there were approximately 40
Pharmacy LAWSONs in operation. Stores dispensing over-the-counter(OTC) medicines now number 100 due to reinforced collaboration witha number of dispensing pharmacies and pharmacy chains nationwide.
In April 2015, we opened a LAWSON store with a nursing care centerin Kawaguchi, Saitama Prefecture. We will continue to collaborate withlocal nursing care providers and develop a store model for supporting
the lives and health of senior citizens (from active seniors to seniors
requiring care) and their families by easing concerns about caregiving.
As a company with stores located close to customers in theircommunities, we are also strengthening our collaboration with local
municipalities to support health improvement programs that provide
opportunities for
OTC medicine available any timecustomers to actively
improve their own
health. We also organize
health promotion events
such as the ENTERUN
program integrating
entertainment withrunning. Lawson is
also working with thenationwide RenaissanceInc. sports club chain
900 OTC medicine products
under a health-related
tie-up agreement on
A LAWSON with a nursing care center
joint development ofConvenience Store
Food Education
Tools combining
Renaissance’s expertisein exercise with Lawson’s
expertise in food.

LAWSON ENTERUN

23

Examples of municipalities withhealth-promotion agreements with Lawson:

Strengthening
collaboration withlocal municipalities

Nutritionallybalanced boxedlunches
Saga City
Nutritionallybalanced
grilled mackerel
boxed lunch

6 Let’s eat high-quality protein (fish & soybeans).

2 Delicious low-carb foods

7 For better intestinal health (lactic acid bacteria)

Enjoying the taste of quality
ingredients
4 Low sodium
5 Saving calories with a smile

8 Use of only high-quality fats!

3

Measures to reduce additives (preservatives
and coloring) and prevent allergies
10 Easy access to functional ingredients

Kurume City

Continually taking up challenges to promote health in body and spirit

Healthful product development: 10 themes
1 Let’s eat vegetables.

MatsumotoCity

Amagasaki
City

9

Hitomi Suzuki

Everyone has different views and needs with respect to health. We can provide convenience through our
products and services, including good-tasting, healthful breads and snacks as well as medicines that
customers can purchase any time of day or night. Still, we are always looking for new ways of leveraging ourstores’ close proximity to customers to promote health in our communities. We are creating an environmentthat enables community residents to exercise easily, for example, and constructing an internal system tocontribute to healthcare for our personnel. We will continue to take up new challenges in our efforts tobecome community health hubs that serve as a fourth component of infrastructure to enable everyone with aconnection to Lawson to participate in health promotion at will.

Director, Health and Wellness Promotion Committee

Bringing Convenience and Pleasure to Daily Life

Every
day

Lawson seeks to provide bettersupport for the communities.

Enjoyment

HealthTime &
distance

SpecialpreferenceHomedelivery

People today are too busy with work, childcare, nursing care, hobbies and learning and other activities to find much time for household duties.
The number of traditional neighborhood shops has decreased, and the large commercial facilities and supermarkets that have replaced them
are not often located in residential areas, forcing people to travel some distance for their daily shopping.
LAWSON serves as a new kind of neighborhood store, where everyone from senior citizens to working people on their way home can stop byeasily and shop for an attractive variety of food products, including boxed lunches, prepared food items, safe vegetables and everything theyneed for breakfast.
Nor is our selection of products limited to food. We are enhancing our product offering to match customers’ daily life needs.

We do everything we can to help customers
meet their “daily dietary needs.”

24

LAWSON offers a wide variety of products and services
to ensure community residents’ ability to eat well at all
times. Prepared fast food items are available for people
who live alone, including small packages of boiled fishfor elderly single-household residents who want tobuy standardized products in small quantities (Lawson
Select side dish packs). Lawson is also responding to
the needs of customers with little time for cooking who
want to take out prepared food items by establishing
Machikado Chubo in-store kitchens in 3,600 LAWSON
stores nationwide (fiscal 2015 target), thus providing theadded value of fresh cooking they cannot find at otherconvenience stores.
At the same time, pre-cut vegetables grown on
farms that carefully maintain a proper mineral balanceusing the Nakashima method and safe, fresh vegetablesfrom Lawson farms are popular among homemakers
who buy ingredients and cook themselves. We are also
directing concerted efforts to daily delivered foods, suchas milk, yogurt, natto (fermented soybeans) and tofu
(bean curd), to contribute to more nutritious, bettertasting breakfasts.

We provide customers with items for“daily use and daily delight.”

Freshly prepared hot fast-foodtakeout products

Genkotsu croquette (fist-shaped croquette)

Prepared food items in small packages
to serve as side dishes with meals

Hamburger in red wine Simmered sardinesdemi-glace saucewith ginger

Imagine remembering while returning from work thatyou are running out of shampoo or detergent. You
would also like to pick up a bottle of wine, a can ofbeer, a side dish and snack or two to go with yourbeer, and some bread and milk for the next morning. . .
Your LAWSON store is the place to pick up all these
items. Then, during dinner, you suddenly notice thatyou are out of soy sauce. What to do? The LAWSON
store located right in your neighborhood is open 24
hours a day to help you out in just such emergencies.
We consider this the role we should play.
When it comes to daily necessities, you need
to be able to purchase them any time. LAWSON is
responding by raising the height of its store shelvesin order to increase the inventory of daily necessities
and diversify the product offering in stores inresidential neighborhoods. We will improve our
products and facilities to meet a variety of needs andmanage our stores to offer quality services in every
aspect of daily life.
A wide selection of daily necessities

25

A neighborhood store that helps customers
relax with a drink at home

Healthful vegetables from healthy soil

Colorful green salad

Agricultural products grown using the
Nakashima-method are adopted as
pre-cut vegetables for sale in LAWSON
stores (some products in some areas).
This farming method grows nutritious
vegetables by maintaining a proper
mineral balance in the soil. We arestarting to introduce the method to
the Lawson farms operating under
exclusive contracts.

Enjoying breakfast with daily delivered
foods from LAWSONLAWSON pursues delightful convenience as a neighborhood
store to community residents’ daily lives
A convenience store is always prepared to replace a supermarket by offering an assortment of easy-to-use
pre-cooked products packaged in appropriate servings and a suitable supply of fresh food products anddaily necessities. We believe this ability is an indispensable prerequisite for serving customers as a reliable
convenience store. We are in the process of changing our product offering to match customer needs andinvesting in installation of larger refrigeration and freezer cases and taller display shelves in 2,300 stores
located primarily in residential areas, positioning them as community-centered stores.
Hisashi Yasuhira
Senior Vice President, Executive Assistant to CEO (responsible for enhancing Lawson’s lifestyle support services)Enriching Lifestyles through the Entertainment Business

Every
day

Lawson delivers enjoyment to thecommunity from the neighborhood
LAWSON store.

Enjoyment

HealthTime &
distance

SpecialpreferenceHomedelivery

Since the 1990s, Lawson has responded to customers’ emerging need for “events and services” as well as“products” by directing active efforts toward entertainment-related services.
Today, our consolidated subsidiary Lawson HMV Entertainment, Inc., a leading company in Japan’sentertainment distribution industry, is playing the leading role in our unique general entertainment business.
Lawson has acquired a major share of Japan’s ticketing market, selling concert, sports, theater and otherentertainment tickets. With HMV as the core organization for these operations, Lawson also sells CDs, DVDs andother music and video software, another business in which it enjoys a leading share.
Various other entertainment services provided to enrich and brighten customers’ lives include the movie business
operated by United Cinemas Co., Ltd. as well as online music distribution and event planning and management.

Gateway to richer, moreenjoyable living anddaily convenience

Lawson Ticket <l-tike.com>

Accessing live events through Lawson
to enjoy extraordinary experiences
Lawson Ticket sells concert, sports, theater, movie and otherevent tickets through Loppi multimedia terminals in LAWSON
stores and the l-tike.com
e-commerce website. The
Company also organizes its own
music, sports and other events.

Customers use Loppi
multimedia terminals installedin LAWSON stores to buy
tickets, CDs, DVDs andbooks; pay for mail-orderand online purchases andcredit card bills; and apply for
campaigns and certification
tests. Large numbers ofcustomers (a total of 98 million
people annually) use the Loppi
terminals to take advantageof their “pay, play, purchase,
benefit and live” features.

Tickets
Lawson HMV Entertainment <CDs, DVDs>

Dispensing entertainment contents to customers throughout Japan
CDs
DVDs

26

Entertainment 360˚

HMV, one of Japan’s top-ranking providers of music and video software in terms of sales,
entered the Japanese market in 1990 and joined the Lawson Group in 2011. This year
marks the 25th anniversary of its business in Japan.
Lawson HMV Entertainment sells music and video CDs and DVDs, books and related
products through its 54 stores in locations throughout Japan (as of end June 2015) as wellas on its e-commerce website.

Books
Magazines
The Lawson Group provides a full 360° response
to customers’ entertainment needs

The Group offers high value-added products and services that respond to customer demandfor entertainment from every direction, and engages in development, planning and operation
to satisfy it. An enhanced ability to make proposals to contents holders for maximizing theircontents’ appeal has contributed to creation of unique Lawson products and services,pulling more visitors to the stores.

United Cinemas <movie theaters>

Providing thrills for moviegoers nationwide!
Games© 2013 Nibariki•GNDHDDTKA Studio Ghibli film: The Wind Rises
Advance ticket sales with limited-edition goods

Lawson is an Official Marketing Partner of Universal Studios Japan®.
© & ® Universal Studios. All rights reserved. CR15-2297

Universal Studios Japan®

© Museo d’Arte Ghibli© Fujiko-Pro

Ghibli Museum, Mitaka

Fujiko F Fujio Museum,
Kawasaki• LAWSON is the only convenience store that serves as an ofﬁcial ticket sales agent for the
Ghibli Museum, Mitaka, and Fujiko F Fujio Museum, Kawasaki.
• LAWSON is an ofﬁcial marketing partner of Universal Studios Japan®
Lawson is now the only convenience store with the exclusive right to sell tickets for the Ghibli Museum and Fujiko
F Fujio Museum through the ticket reservation system.
Lawson is also an Official Marketing Partner of Universal Studios Japan®. Not only can customers purchasetickets for Universal Studios Japan® at LAWSON stores, but they were also given a chance to win an
invitation to participate in a Reserve Universal Studios Japan® event by collecting raffle tickets
dispensed with each 700 yen (incl. tax) spent on purchases at LAWSON stores througha campaign on the occasion of Lawson’s 40th anniversary in June 2015. The event
stimulated excitement and added to the fun of the 40th-anniversary festival.
Thus, Lawson not only handles ticket sales but also takes advantage of its
MoviesTravelentertainment business to conduct activities and develop productsthat help increase sales at the stores.

Other
Store
products

Goods

Japan’s third-ranked cinema complex operator, United Cinemas joined the Lawson Group in 2014. The
company operates 37 movie theaters with 333 screens nationwide (as of end March 2015), including acomplex that was selected for a Good Design Award*1 (Personal Service Systems category). It draws
on the synergies of the Lawson Group to satisfy demand for new ways of enjoying leisure hours, suchas watching movies in a theater and then relaxing in a comfortable lounge on the site. It meets various
other customer needs as well by offering contents other than movies, as exemplified by its positive
introduction of 4DX®, a hands-on attraction, along with ODS*2 and various events.
*1 Good Design Award: The Good Design Award is a comprehensive design-promotion system that selects good designs from among avariety of unfolding phenomena with the aim of enriching people’s lives, industries and society as a whole by highlighting and celebratingthese works. The program is sponsored by the Japan Institute for Design Promotion, a public interest incorporated foundation.
*2 ODS: An acronym for “other digital stuff,” ODS refers to digital image works other than movies that are shown in movie theaters.

Entertainment products and services adding Enjoyment tocommunity life

Akihito Watanabe

The Lawson Group has a history of engaging in a variety of cinema-related activities. It conducts various
large-scale campaigns, including tie-ups with movie production companies.
The recent addition to the Lawson Group of an extremely high-profile movie-related businessspecializing in entertainment contents will enable us to leverage the synergies to enhance Lawson’s
uniquely attractive products, campaigns and services through collaboration among Lawson, Lawson
HMV Entertainment and United Cinemas. We will pursue further expansion of our existing businesses bypromoting the services of Lawson and Lawson HMV Entertainment among the 13 million theatergoers
visiting United Cinemas theaters each year and its 1.4 million members.

Senior Vice President,
Deputy Division Director, Entertainment and Consumer Service Business Division, and President, United Cinemas Co., Ltd.

27

Developing Stores and Business Approaches to Better Meet
Customers’ Specific Needs

Lawson responds to changes incommunities and the particularneeds of customers.

Every
day

Enjoyment

HealthTime &
distance

Specialpreference

NATURAL LAWSON supports“beautiful, healthy, and comfortable”
community lifestyles

Homedelivery

Since its beginning as a retailer of party foods and other such items, Lawson has evolved in tandem with changes
in the times and its communities. The most popular goods and services today are those that have been created in
response to community needs. “I want quality products, even if they cost a bit more”; “I want to improve my healthand appearance”; and “I want to buy in the right amounts and in small packages to avoid waste.” —We respond toincreasingly specific community needs of this kind beyond the established LAWSON framework.

As it celebrates the 40th anniversary of its
establishment, Lawson continues to evolvewith its communities.
28

NATURAL LAWSON, whose business model is now
celebrating its 15th anniversary, offers safe seasonal,
beauty and health products for customers’ use in daily
life through stores with pleasant atmospheres. Salads
that meet all people’s daily nutritional requirements,smoothies that let customers enjoy 100% of thedelicious flavor of fruits, and skincare products
containing essential natural oils are some of its
especially popular products.
NATURAL LAWSON’s product offering has always
resembled that of the SEIJO ISHII CO., LTD. foodlifestyle supermarket chain, which has a similar productconcept. Now that Seijo Ishii has joined the Lawson
Group, the two will work closely in the areas of raw
materials purchasing and product development tobroaden their customer bases.

In 2014, Lawson purchased the shares of SEIJO ISHII CO., LTD.,a specialty supermarket that is extremely particular about the
food products it sells. Established in 1927, Seijo Ishii has always
insisted on offering delicious food products. Its personnel travel
extensively in Japan and around the world to seek out and develop
safe food products. The company promotes the true benefits ofthe products its personnel gather and offers its customers thepleasures of food, selectivity, conversation and time spent together.
Seijo Ishii maintains centralized kitchen facilities, where itprepares a variety of side dishes and other prepared food products
internally. It also operates an import company. Its business model
is to act as a manufacturing retailer based on a small commercial
area model, a model Lawson shares. Going forward, we will makethe most of our positive synergies with Seijo Ishii in the areas ofproduct procurement, distribution and management, and benefit
from its expertise in product development and sales approaches inthe sphere of chain-store development and operation.

Offering products in the right amounts, in small packages
and at the same set price of 100 yen
LAWSON STORE100 — a friendly contributor to communities

Comfiture yoghurt

Starfruit &yuzu froosh

Strawberry banana& guava frooshLarge-serving
cooked rice

29

Château La
Verrière rouge

SEIJO ISHII homemade
Vienna pork sausages

SEIJO ISHII homemadepremium cheesecake

SEIJO ISHII organic
extra virgin olive oil
produced in Italy

The number of “shopping refugees” in Japan is growing due to the declining birth rate and aging population. With the contraction of theworkforce, we need to create mechanisms to maintain and develop a social infrastructure that promotes women’s participation in society
and makes positive use of human resources of more advanced ages. In an era of weakening connections among people in communities,
Lawson has strengthened its resolve to “go the final mile” in support of community life. In April 2015, the Company signed a businesscollaboration agreement with SG HOLDINGS CO., LTD., a major logistics company of which SAGAWA EXPRESS
CO., LTD., a leading home delivery service, is a core group member. Lawson and SG Holdings jointly establishedSG Lawson to provide home ordering and delivery services in small commercial areas. We will be offering newservices that integrate delivery and convenience store services to contribute to the development of communities
in which residents support each other and enjoy their lives. SG Lawson delivers boxed lunches sold at LAWSON
stores and other products from Lawson Fresh, NATURAL LAWSON, Daichi wo Mamoru Kai and Radish Boya.
It also relays and delivers the products of e-commerce and mail-order companies and life-support services topromote Lawson’s original Open Platform Strategy for increased customer convenience.
Kazuya Nobe

Fried chicken

Sesshu salad
Dietary fiber

Establishing close ties to customers and offering greater convenience.
We “go the final mile” in support of community life.

LAWSON STORE100 is clearly different from conventional convenience stores.
It responds to customers’ need to save and concentrates on providing value formoney. Almost all the 4,000 or so products stocked, including fresh food products
and daily necessities, are sold in the right amounts, in small packages and at thesame set price of 100 yen. Not only are the products inexpensive, but their quality
is also appropriately managed, a distinctive characteristic of the Lawson Group.
The stores cooperate with producers in various regions of Japan to sell fruits andvegetables of assured freshness and high quality. They develop products jointly withreliable suppliers in order to offer safe products with good value.

Shredded cabbage grownby the Nakashima method

Leaf & Botanics

SEIJO ISHII
A food lifestyle supermarket
with a food-conscious customer baseCommunities evolve continuously with changes in consumer lifestyles
and modes of shopping. LAWSON has contributed to its communities
by continuously identifying and responding to new needs. It now offers“foods people eat every day and items people use every day.” Special
examples include fast foods and MACHI café and Machikado Chubo
in-store kitchen products with a focus on the added value of freshly
prepared food that requires a little extra time and effort. Motivated by adesire to make its communities more lively and active, LAWSON sells
good-tasting, healthful products, such as bran bread and vegetables
grown according to the Nakashima method, as well as pharmaceuticalproducts. We also offer many entertainment products. And we are
pursuing efforts to construct an open platform with the aim of positioning
ourselves closer to customers and bringing happiness andharmony to our communities.
The essential Lawson nature
will continue to evolve and change
in response to changes in ourcommunities.

Kotsubu natto (fermented
soybeans made with smaller beans)

EcoverClean ice

Honjozosoy sauce

Senior Vice President, Division Director, Home CVS Business Division

Growing with Franchise Stores under a New Franchise System

The smiles of franchise owners energize
the community.
Lawson’s franchise (FC) system can be characterized as a “joint business system” in which the relationshipbetween franchise owners and headquarters is an equal partnership of business associates who share
Lawson’s Corporate Philosophy, “Creating Happiness and Harmony in Our Communities.”
While strengthening these partnerships, Lawson is working to achieve further development of the franchise
stores and their staff and to reform the stores to contribute to their surrounding communities.

The franchise stores and headquarters
contribute to their communities in a
Win-Win relationship.
Lawson respects the independence of franchise owners
in its store management, and the franchise stores andheadquarters communicate closely with each other.
Lawson seminars for clarification of Company
policies and directions and franchise owners’ meetings for
opinion exchanges are held to share Lawson’s Corporate
Philosophy and strengthen the Company’s relationshipwith the franchise stores. Executives and management
personnel attend these events to support these objectives.
In this way, a number of opportunities are provided tobring the partners together to conduct frank discussions ofstore-related issues with the aim of building positive mutual
relationships.
Lawson introduced the Management Owner (MO)system in 2010 as a unique approach to supporting thebusiness expansion of entrepreneurial franchise owners.
The system seeks to develop highly competent owners byproviding them with the management knowledge and skills
they need to manage multiple stores.
Lawson provides support to strengthen the franchise
stores’ management and, at the same time, ensures thatthe opinions and ideas of franchise owners and store crew
who know their communities best are conveyed to Lawson
management. The aim is to enable the partners to growand develop together.

30

Management Owner (MO) system
Business management

MO(Management Owner)
Manages operations / develops human resource

SC(Store consultant)
Makes rounds of individual stores / provides guidance

MC (Headquarters)

Lawson Seminar

Management Owner system support mechanism(Management
consultant)

Provides guidance on operations management

Franchise Owners’ Meeting

Unique guidance system

Support for system
upgrading

Prompt provisionof opportunities for
expansion

Provision of opportunities
for participation in
management

Promotion of transfer to the new FC contract
for stronger support of franchise stores
Lawson is working to introduce the new FC contract aheadof schedule to facilitate mutual growth and development of
headquarters and the franchise stores’ business. Headquarters
will assume part of the franchise stores’ electricity expenses
and disposal losses and increase its investment, together withthe franchise stores, to increase the profits of franchise owners.
Introduction of the new FC contract was initiated in 2012, but it wasavailable only to newly opening stores and current franchise owners
at the time of contract renewal. Lawson is now accelerating the
introduction of the new contract to all the stores by inviting existing
stores to transfer to the new FC contract before their scheduled
contract renewal, provided that they transfer within a limited period
which began April 2015.
Fiscal 2015 is positioned as the year for reinforcing Lawson’s
foundation. As part of this effort, we will begin implementing a semiautomatic ordering system, an unconventional system based in parton analyses of Ponta members’ purchasing behavior, to increase
efficiency and improve accuracy in order placement. A review of thefundamentals will be conducted across a wide range encompassing
the FC contract, which serves as the basis for the franchise system,and order placement, which provides the basis for store operation.
The franchise stores and headquarters will work together torealize a situation in which LAWSON stores offer “what you want,when and where you need it.”

Lawson Staff, Inc., a temporary staffing
agency, is taking the worry out of job hunting.
Lawson established the temporary staffing
agency Lawson Staff jointly with the
Fusion'z, a management owner, in March2014 as part of efforts to eliminate staff
shortages in the stores.
While Japan’s workforce iscontracting due to a low birthrate andaging population, the number of job
seekers who are unable to find jobs is growing. These include
international students who are confronted with language andcultural differences, elderly people who feel challenged by suchcomplicated tasks as operating a cash register, and homemakers
who can work only during certain limited hours. Lawson Staff
conducts various activities to mitigate these worries, such asorganizing events to enable international students to experience
Japanese culture and providing training for applicants in LAWSON
stores prior to conducting job interviews or offering employment.
Lawson Staff has been operating a call center for temporary
staff since December 2014. As a licensed employment agency,
it does not stop at simply contacting stores about potential
temporary employees, but it also conducts follow-ups. If theconditions set by the parties are not in agreement, for instance,
the agency may refer the worker to another nearby store. Even
workers who have been successfully placed in a job can request

Features of the new FC contract• Headquarters will pay half a store’s electricity
expenses and assume a portion of its disposal
costs, depending on the ratio of disposal losses.
• The franchise commission ratio will also be revised
such that commission income will increase withincreases in sales.

31

further training if they are concerned about their preparation for
positions to which they are assigned.
Another characteristic of Lawson’s hiring practices is
a proactive approach to employing international students
as a means of securing human resources from a long-term
perspective. Many prospective employees state such clear
objectives as, “I want to learn Japanese hospitality,” or, “I want tobe a corporate manager when I return to my country.” Over 350
international students, including students from Vietnam, Taiwan
and China, have registered for employment with Lawson Staff. (Asof end June 2015)
Lawson Staff continues to take up new challenges andthink creatively to ensure that people who want to work but feel
restricted can work “smiling and free of worries for a long time,”
irrespective of their age, sex or nationality.

Organization for Sustainable Corporate Management

Internal Control
Basic policy regarding the internal control system

Respond responsibly to risks,
while creating business
opportunities
Masakatsu Gonai
Executive Vice President, Member of the Board—Compliance & Risk
Management and Human Resources, Division Director,
Franchisee Business Support Division

Main risks recognized by Lawson

32

1. Risks related to changes in the businessenvironment
Risks arising from changes in domestic or international
economic conditions, economic trends and social
structures, changes in consumer behavior in response
to abnormal weather, and changes in competitive
conditions with respect to other companies in theconvenience store industry and retailers in otherbusiness categories.

2. Risks related to food safety, hygiene
management and labeling
Risks of the unlikely occurrence of such serious causes
for concern as food poisoning, contamination or
erroneous representations of food products.

Risks of personal information leaks as well as
unauthorized access to personal information.

4. Legal and regulatory risks
Risks of changes in various laws and regulations
governing communities where stores are opened as well
as changes in administrative guidelines.

5. Risks related to franchise operations
Risks of franchise contract cancellations due todeterioration of the relationship of trust between the
Company and its franchise owners.

6. Risks related to disasters
Risks of physical damage to Group stores,
manufacturing plants, distribution centers and otherfacilities as well as disruptions occurring due to natural
disasters such as earthquakes, tsunami, typhoons or
blizzards.

7. Risks related to problems with IT systems
Risks of disruption of merchandise delivery orsuspension of store operations due to IT system failures
resulting from earthquakes or other natural disasters orfrom events such as infection by computer viruses.

8. Risks related to sharp rises in raw materials
pricesRisks of rising raw materials prices due to suchoccurrences as surges in the price of crude oil, abnormal
weather associated with climate change or otherunpredictable events.

*1: CR executive officer: The executive with overall responsibility for the development andimplementation of a framework for identifying misconduct and problems concerning legal
compliance and preventing risks from arising*2: CROs (compliance and risk management officers): Persons responsible for compliance in thevarious divisions who support the CR executive officer and assume overall responsibility for thedevelopment and execution of a frameworks for identifying misconduct and problems concerning
legal compliance and preventing risks from arisingThorough dissemination of information concerning importantlaws and regulations
Among the wide-ranging laws and regulations requiring
observation, the Antimonopoly Act, Subcontract Proceeds
Act and Act against Unjustifiable Premiums and Misleading
Representations are accorded particular emphasis for thoroughdissemination.

Enhancement of framework for Group information security
governanceAppropriate personnel are assigned to the Information Security
Management Office to enhance the framework for improving theeffectiveness of the Group’s information security governance.
Clarification of items related to the affiliated company
management framework and the effectiveness of audits
conducted by auditors
The framework for gathering information on issues related
to the execution of duties at the Company’s main affiliatedcompanies, the framework for reporting to the Company on risk
issues encountered at affiliated companies, and the framework
for timely reporting to the Company’s auditors regarding thecontents of consultations and reports handled by the Lawson
Group’s outside consulting and reporting contact personnel
have been clarified.

33

Lawson’s internal control system (as of March 1, 2015)
Board ofCorporate Auditors

Internal control audits/regular meetings

Corporate Auditors
OfficeReports on important issues

Board of Directors
CEO
CR executive
officer

Mutual understanding/information exchange

3. Risks related to the handling of personal
information

The Lawson Group is introducing a wide variety of services, from ticket sales andfinancial services to e-commerce transactions, with the convenience store businessas our core business. Offering a diverse range of products and services through ourstores in Japan and overseas requires us to deal with wide-ranging risks as well.
Operating under these circumstances, it is essential that we respond responsibly tobusiness risks by implementing more comprehensive internal control Groupwide toachieve sustainable management. The Company has responded by appointing officers
responsible for strengthening the compliance and risk management framework, and I
have been assigned to handle the responsibilities of the CR executive officer*1. We havealso developed a framework for rapid risk information assessment and countermeasure
implementation, with an emphasis on attaining the requisite sensitivity to assureawareness of even the most minute details, by establishing a Compliance & Risk
Management Office and an Information Security Management Office as well as assigning
CROs*2 to each headquarters division and area to assist me in performing my duties.
Among the wide-ranging risks facing us, we place particular emphasis on threeareas: “food safety and hygiene management,” “information security” and “disaster relief.”
The importance of these areas stems from the facts that safe, reliable food provision
is the core competence of our business operations, that the data we employ in ourinnovative activities include vital customer information, and that our mission is to support
our nationwide network of stores and to provide customers in local communities with acontinuous supply of products and services. The CROs play a central role in dealing withvarious other risks, of course, and each division takes responsibility for formulating andimplementing measures to prevent and respond to emergencies.
Actions taken to respond responsibly to risks create business opportunities at thesame time. We have established specialist departments and a specialized subsidiary totake responsibility for securing stable procurement, for example, in preparation for suchrisks as supply shortages or soaring raw materials prices due to abnormal climatic or
economic trends. This has provided us with the ability to supply safe, high-quality raw
materials efficiently, an advantage that contributes to our development of high addedvalue merchandise.
The Lawson Group is striving to realize its corporate philosophy, “Creating
Happiness and Harmony in Our Communities,” by dealing with wide-ranging risks while
also responding to and resolving social issues, implementing environmental preservation
activities and taking on challenges for creating new business opportunities to achievesustainable business operations.

The Lawson Group has established the “Basic Policy for
Maintaining the Internal Control System” to support its efforts toachieve healthy, sustainable growth as an entity with businesscharacteristics that require observation of a diverse range oflaws and regulations and responses to wide-ranging risks.
We are promoting maintenance of our internal control
system based on this policy, while responding to changes inour management environment, conducting periodical reviews of
the policy itself, and endeavoring to maintain and enhance aneffective, practical internal control system.
The main points of the revisions of the “Basic Policy for
Maintaining the Internal Control System” implemented in fiscal
2015 are described at below.

Compliance & Risk Management Committee
Compliance & Risk Management Meeting

Normalcircumstances

Compliance & Risk Management Office• Food Safety and Hygiene
Management Subcommittee• BC Subcommittee• Regional Ofﬁce Crime Prevention
and Disaster Defense Subcommittee• Information Security Subcommittee• CSV* Subcommittee
Emergency Risk Management
Committee Meeting
Internal Audit Division

Information Security Management Office

Divisions and Areas

CRO

Emergency
circumstancesInternal
control audits
Guidance/
supportAffiliated companies

Close communications/basic management policy

Affiliated Company Compliance Officers Meeting
Affiliated Company Information
Security Subcommittee*CSV: Creating Shared Value

Franchise stores

Compliance and Risk Management

Lawson’s Compliance and Risk Management System
Lawson has established a compliance and risk management
framework based on its Corporate Conduct Charter and Codeof Ethics. We seek to conduct business as a good corporate
citizen, acting honestly and considerately according to highethical standards, implementing the PDCA (Plan-Do-CheckAction) cycle, and organically linking our behavioral standards
with our education and training programs, communication
functions and monitoring activities.

Formulation of action guidelines and standards
In addition to the Code of Ethics and various internal rules withrespect to compliance and risk management issues, we haveestablished the Lawson Group Privacy Policy and the Lawson
Group Purchasing Policy to ensure proper conduct of businessthroughout the Group. We have compiled these in the “Lawson
Group C&R Handbook” and distributed it to all our employees
to attain their understanding of the policies.

Corporate Conduct Charter
Basic declaration
We believe that fulfilling our corporate social responsibility while
responding to the requests of our stakeholders will contribute toenhancing the corporate value of the Lawson Group. Based ona clear understanding of the Charter’s contents and observing
all relevant laws, we pledge to act honestly and sincerely at all
times according to high ethical standards.

Lawson Group CR
handbook

Basic disciplines34

1.	We shall act with consideration toward all our customers.
2.	We shall support our franchise stores, which are our closest
partners.
3.	We shall conduct fair, transparent transactions with all ourbusiness partners.
4.	We shall create a pleasant workplace environment for all our
employees.
5.	We shall disclose requisite information to all our shareholders
and investors.
6.	We shall take a proactive approach to environmental
preservation and conduct positive social contribution activities
as a member of the local community.
7.	We shall have no relationship with any anti-social organizationand shall maintain healthy, appropriate relationships withelected officials and public employees.
8.	We shall observe internal rules and regulations in conducting
our daily work to avoid loss of any valuable assets of theLawson Group.

Management organization
Behavioral standards formulation (including the
Corporate Philosophy, Code of Ethics, others)

Post-emergency review

Education, training, practice

Review and improvement of measures

Enlightenment activities
conducted within
departments by
personnel responsible
for promoting measures

Verification of progress/
monitoring of implemented measures

Establishmentof contacts for
consultations

Conduct of duties based on
behavioral standards(implementing measures)

Formulation of compliance and risk
management measures by therespective departments

Emergency preparedness
and responses

Appointment of CR promotion officers
We have appointed an Officer in Charge of CR (complianceand risk) with responsibility for promoting compliance and risk
management. Compliance and risk management officers (CROs)
assigned to each department at headquarters and the regional
offices are tasked with establishing and raising awarenessof compliance measures and risk countermeasures in theirrespective departments and with contributing to creation of aculture that emphasizes compliance with social norms.

Education and training enhancement
Lawson seeks to improve its employees’ ethical awarenessand risk response capabilities by providing compliance and risk
management training each year. It has developed a training
system to support structured, systematic learning that begins
with training of newly recruited employee and extends to trainingof newly appointed management personnel and specialized
occupational training as well as biannual compliance training
for management members provided by outside instructors. Our
ongoing implementation of these training programs is designed
to encourage personnel in every position and with every job
description to share in the problem-solving process leading tobusiness enhancement.

Consultation and notification system establishment
In addition to human resources department personnel who
specialize in consulting concerning sexual harassment andabuse of power and legal department personnel who provide
consultations on legal matters, Lawson has establishedconsultation contacts for providing consultations and receiving
internal notifications with respect to compliance and risk
management issues. In addition to establishing the Lawson
Group Outside Consultation/Whistleblower Hotline involving
law firms and other external organizations, the Company
has created a framework for providing business partners’
employees with consultations anonymously.

Reinforced operational management and monitoring

Enhanced cooperation among Group companies

Lawson has established the Compliance and Risk Management Office and the Information
Security Management Office and staffed them with specialized personnel under the
direction of the officer in charge of CR. As the entities responsible for promoting andassuring compliance as well as for conducting risk management, these offices serve as
cross-departmental secretariats for the compliance and risk management committees andmanage the progress of measures implemented by the individual departments throughout
the Group. Five separate subcommittees (the Food Safety and Hygiene Management
Subcommittee, the BC Subcommittee, the Regional Office Crime Prevention and theAccident Prevention and BCP Subcommittee, the Information Security Subcommittee,
and the CSV Subcommittee) have been established under the Compliance and Risk
Management Committees and tasked with managing the progress of important measureswhile preventing the emergence of risks.
The subcommittees collaborate with the auditing department, moreover, andreceive reports on the results of compliance audits as needed while also providing detailed
guidance for implementation of measures and offering proposals for improvements.
Besides awareness surveys involving all the employees, the monitoring activities
extend to circulation of questionnaires among business partners concerning such matters
as delivery of merchandise to stores and store construction as part of efforts to review thecompliance systems from a broad perspective.

Officers responsible for compliance and risk management havealso been appointed at the Group companies, and Lawson
holds meetings of affiliated company compliance officers.
Besides formulating the Code of Ethics and providing training
regarding it to improve employee awareness, we conduct thesame employee awareness surveys and questionnaires we
use for business partners at the Group companies as well. In
addition, the Lawson auditing department conducts audits ofoperational duties at Group companies, and the companies’
boards of auditors convene meetings to provide guidance andassistance in establishing and improving their compliance andrisk management
frameworks.

A meeting of affiliated company compliance officers

Risk preparedness and responses
Responses to emergencies
Lawson places particular emphasis on “food safety and hygiene
management,” “information security” and “disaster relief,” and it has
prepared a structure for responding to emergencies and resolving
problems rapidly.
Meetings of the Compliance and Risk Management Committee
as well as of the five subcommittees are convened under ordinary
circumstances to assess risks and formulate and promote measures toavoid them in an effort to prevent their occurrence.
Should a serious risk situation arise, an Emergency Risk
Management Committee is organized to resolve issues swiftly andminimize damage. Once the problems have been resolved, theCompany analyzes the factors contributing to the occurrence andreviews and improves the relevant measures to prevent any recurrence.

Improvement of the information security framework
The “Lawson Group Privacy Policy” has been formulated to promote
protection of personal information. To ensure that the relevant personnel
understand specific details of the contents and are prepared to implement
them, the Company publishes potential mistakes and complaints that
may arise at the stores, accompanied by practical responses to them, invarious manuals produced for the stores in an effort to raise awareness.
Headquarters employees are tested periodically to ensure that they are allacting reliably based on the “Lawson Office Security Rules,” in which mattersto be observed are compiled.
We have established a system for specifying methods of gatheringand storing information as well as information storage periods and fordesignating persons responsible for handling customers’ valuable informationin each instance after advance checking by specialist departments.
When consigning responsibility for storing personal information
to outside organizations, we require that a detailed investigation of theorganization’s security framework be conducted in advance and thatconsignment of the responsibility be made only to organizations that satisfy
Lawson’s conditions. An onsite or documented inspection is conductedannually, moreover, to ensure that the conditions are maintained.
We are also evaluating our information security framework from avariety of other perspectives to ensure that it remains robust by implementing
information security audits by our internal audit departments and employing
specialized outside companies to carry out unannounced surveys of officesecurity and diagnose any vulnerabilities in our information systems.

Crime prevention at stores
We conduct education to ensure that store personnel act withthe highest priority placed on personal safety and with crime
prevention in mind, in ways such as greeting customers ina cheerful and spirited manner. We are cooperating with thepolice and the Japan Franchise Association in efforts to prevent
crimes against the convenience store industry as a whole.
Actions taken as crime prevention measures
1. Promotion of security camera installation
Security cameras are installed at every store to discourage potential
perpetrators from committing crimes and to support investigations
that may lead to the arrest of perpetrators in the unlikely event an
incident should occur. The security cameras are being replaced bydigital models to obtain better image and audio quality.
2. Creation of an environment for store crew education
Reminders pertaining to crime prevention are distributed for display
on POS registers and store computers, and manuals and usefultools for crew education such as crime prevention self-check lists
have been prepared as well.
3. Enhancing guidance provision during patrols
Crime prevention guidance is also provided during store patrols
to raise awareness at
franchise stores.

A DVD on measures to prevent
robberies and other crimes

A crime prevention self-check list

35

Compliance and Risk Management

Social and Environmental Activities

Assuring continuity of business operations

Lawson Group’s Social and Environmental Activities

Fundamental policies and objectives for maintaining
business continuity (BC)Interruption of important business activities shall be avoided, evenwhen emergency situations involving serious damage occur, while
maintaining a priority on securing people’s safety and wellbeing.
Even if business operations are unavoidably interrupted, critical
functions shall be resumed quickly in order to avoid undermining
our customers’ satisfaction or corporate value.
<Three main goals for maintaining business continuity (BC)>Fulfilling Lawson’s mission as a “community lifeline”
We will endeavor to ensure uninterrupted provision of products
and services to customers by keeping stores open wheneverpossible.
Continuation of the franchise (FC) businessWe will determine specific periods and methods for resuming
operations and maintain the requisite level of FC headquarters
operations.
Securing appropriate earnings
We have implemented measures in consideration of the impact
emergencies could exert on earnings and of social conditions inorder to secure an appropriate level of earnings necessary to theCompany’s survival.

36

Practical procedures are compiled in the Business Continuity Plan
(BCP), and we are pursuing efforts to establish a BC framework
in line with the BCP, and to sustain and enhance it, as important
issues for management.

Formulation of BCP guidelines
Lawson has formulated the “BCP Guidelines” as a practical action
manual describing responses to emergency situations based on
the Business Continuity Plan. The current guidelines summarize
in an easy-to-understand manner appropriate responses by the
responsible personnel to such hypothetical emergency situations
as the occurrence of an earthquake under the Tokyo Metropolitan
Area, the appearance of a new strain of influenza, and such
events as deep offshore earthquakes, nuclear power plant
accidents, volcanic eruptions and heavy flooding.

Mechanism for enhancing BC capabilities

Lawson Group Environmental Policy

Activities conducted to improve response capabilities are essential
for sustaining a corporate climate adapted to responding
sensitively to a variety of crises. Lawson is continually reviewing
such business components as “hardware” factors involving officebuildings and lifelines, “software” factors involving its BCP andmanuals, and “skills” factors involving employees and FC stores.
The Company uses its findings to implement improvements incrisis response capabilities throughout the Group.
Mechanism for enhancing BC capabilities
Corporate climate sensitive to crisis response
Awareness of the importance of and structures for continuous improvement activities

BC capabilities
Maintenance of important business duties and uninterrupted store operation

Hardware

SoftwareAdvancemeasures

SkillsAction plan
Framework establishment/
upgrading anddistribution of roles
Assignment of roles
and procedures

Implementation of
preventive measuresand disastermitigation measures

Revision of manuals
Restructuring of BC

Training and lecture sessions
Skills enhancement

In its capacity as a community lifeline, Lawson is making
progress toward concluding agreements with local
governments concerning cooperation in the provision of goods
and assistance to stranded commuters in times of disaster.
Status of disaster agreements concluded
with local governments*(As of February 28, 2015)<Entities concluding agreements on provision of
goods in times of disasters>
Local governments: 47 prefectures,
15 cities and wards
Others: Tokyo Fire Department andJapan Ground Self-Defense Force
Mass transit systems: 8 systems
Electric power companies: 2 companies<Entities concluding agreements
on assistance to stranded commuters>
Local governments: 39 prefectures,
10 ordinance-designated cities* The conclusion status is shown on the map only in prefectural units.

More than four years have passed since the Great East Japan Earthquake, but the communities in thedisaster area will require a great deal more assistance before they achieve a complete recovery. The Lawson
Group continues to provide them with recovery assistance by opening stores, providing employment,
developing products using foodstuffs from the Tohoku Region and conducting fund-raising activities tosupport school attendance by students whose lives have been impacted. We are leveraging our network ofsome 12,000 stores in 47 prefectures nationwide in an effort to fulfill our role as social infrastructure.
The LAWSON store in front of the town office of Namie-machi, Fukushima Prefecture, reopened for business in August
2014 to serve people who have returned home temporarily or who are engaged in community recovery work.

Our basic principles
Committed to sustaining the blessings of Earth for future generations,the Lawson Group will not only pursue business activities in anenvironmentally sound manner at all times, but it will act energeticallyto achieve sustainable development and harmonious interaction withlocal communities.

Our principles
1: Creation of a low-carbon society
2. Consideration in the development of products and services
3. Active participation in social contribution activities
4. Continuous improvements
5. Observance of laws and regulations
6. Promotion of communication

Two approaches to social and environmental activities
Contributing to achieving a sustainable society from two
perspectives.
The Lawson Group seeks to contribute to achievement of a sustainable
society from the following two main perspectives.
First, we pursue activities that make proactive contributions
to society and the environment. In particular, we are endeavoring todetermine the volume of CO2 emissions released from our supply chains
and installing the latest energy-efficient equipment in our stores as partof efforts to reduce CO2 emissions from our operations. Second, we
provide proactive support for our customers’ social and environmental
activities by delivering eco-friendly products and services.
We are employing the ISO 14001 environmental management
system to promote business activities that are considerate of society
and the environment and implementing the PDCA (Plan-Do-CheckAction) cycle to promote a harmonious relationship with society
and reduce the environmental burden. In addition to internal audits
conducted several times a year, the Company is subject to third-party
audits by the Japan Quality Assurance Organization.
We are continuously verifying the status of our activities throughsuch means and working to improve them.

Lawson Group’s Target Image

Achievement of asustainable society
Proactive socialand environmental
activities

Reduction of the environmental
burden in everything from raw
materials procurement to sales
activities at stores

Cooperative socialand environmental
activities withcustomers

Support for customers’
activities throughproducts and services

Applications for ISO14001 certification as of March 1, 201519 headquarters, 8 areas, 2 Group companies and 11,125 stores.

Promotion of social and environmental education
Conclusion of agreements forprovision of goods and assistanceto people stranded by disasters
Conclusion of agreement for supply
of goods in case of disasters

Mission as social infrastructure: Continued recovery assistance

Lawson Group Environmental Policy

Advancemeasures

Training to improvethe crisis response
capabilities of personnel
and organizations

Cooperation with local governments at times of disaster

BCP Guidelines

Contributing to society and the environment throughour core businessIn accordance with its corporate philosophy, the Lawson
Group conducts vigorous business activities aimed at “Creating
Happiness and Harmony in Our Communities” (sustainablegrowth) with consideration given to society and the environment
at all times. Our Environmental Policy serves as the foundation
for these activities as well as their driving force. Based on thispolicy, we are seeking to pass on the blessings of our abundant
Earth to future generations through efforts aimed at realizing
a sustainable society and through social contribution activities
as a local community member. In pursuing these activities,
we share our philosophy with all our Group companies andbusiness partners with the aim of enhancing our corporate
value.

Groupwide training to raise awareness and deepen knowledge
High levels of awareness, knowledge and information are essential
for contributing to society and the environment. The Lawson Group
provides social and environmental education for headquarters
employees as well as for franchise owners and store managers
and crew. Education of headquarters employees begins with new
employee training and extends to annual general environmental
training of all employees via e-learning. Franchise owners and store
managers and crew receive training at the time of store openings
and a continuous flow of information through in-house magazinesand our Environmental Report.
Since 2012 we have been urging the representatives
responsible for promoting CSV* activities in the various departments
to take the Certification Test for Environmental Specialists (Eco Test)
to encourage their acquisition of broader knowledge.
* CSV (Creating Shared Value)

CSV Subcommittee
With the CSR Promotion Department of the Business Operations
Support Division acting as a secretariat, the CSV Subcommittee
convenes meetings every other month attended by representativesof headquarters, the various areas and the Group companies
responsible for CSV promotion. Its principal activities include
managing progress and sharing information with respect to socialand environmental
goals, providing
guidance andassistance forstores, responding
to internal and thirdparty audits, andpromoting socialand environmental
education.

37

Social and Environmental Activities

Materials flow and CO2 emissions in Lawson’s supply chain
Since fiscal 2011, we have been submitting to inspections foremissions certification in our efforts to measure CO2 emissions from our
supply chain more precisely. CO2 emissions from electricity consumption
by our stores (Company-operated stores: Scope 2; franchise stores:
Scope 3), From gasoline consumption by headquarters’ Company
vehicles (Scope 1), and from stocked raw materials (Scope 3) wereassessed for fiscal 2014. We also invited the Japan Quality Assurance
Organization (JQA) to perform onsite and document assessments
based on ISO 14064-3, which led to issuance of a Greenhouse Gas
Emission Verification Statement.

Efforts to reduce the environmental burden throughout ouroperations, from raw materials procurement to product disposal
Energy and resources such as electricity, gasoline and water are
consumed and CO2 and waste are discharged in the provision of
products and services by the stores. We are working to acquire anunderstanding of the environmental impact exerted in each stage of our
supply chain, as well as to conserve energy and reduce the volume ofresources used and waste discharged in order to reduce the burden weplace on the environment.
Materials flow in our supply chain
Electricity
Water
Gasoline & diesel fuelCrude oilFoodstuffs, etc.

Electricity
Water
Propane gas
Crude oilRaw materials & packing
materials, etc.

Electricity
Gasoline, diesel fuel& natural gas
Packing materials

Raw materials procurement

Manufacturing plants

Distribution centers

INPUT

Building energy-efficient storesElectricity
Water
Containers &packaging, etc.

Diesel fuel& natural gas

Delivery vehicles

Electricity
Water
Paper & officesupplies, etc.

Gasoline
Electricity

StoresCompany vehicles

Headquarters& offices

Lawson is working to reduce electricity consumption in order
to conserve energy and reduce CO2 emissions by the stores. A
reduction of per-store electricity consumption by 20% in fiscal
2020 compared with fiscal 2010 has been set as a medium-termtarget, and the installation of facilities such as energy-efficient airconditioning equipment and LED lighting is underway in the stores.
Of particular note, we are installing freezing and refrigeration systems
that use CFC-free refrigerants (CO2 refrigerants) boasting a global
warming coefficient about 1/4,000 that of chlorofluorocarbons(CFCs). We have adopted these in many newly opened stores sinceAugust 2014 to benefit from their superior energy efficiency as well.
CFC-free equipment had been installed in about 580 stores as ofend February 2015.

120

OUTPUT

CO2 2
Waste materials
Effluent

CO2 3
Waste materials

CO2 5
Waste materials
Effluent

CO2 4

100

CO2 7
Waste materials
Effluent

CO2 6

60

CO2 emissions from our supply chain in fiscal 2014

38

Approximately

4,728.3 thousand tons
Business trips 7

0.01% [0.5]Scope 1 (direct emissions)(indirect emissions of energy resources)

Category 1

Gasoline consumption byCompany vehicles 6(Purchased products and services)

0.13% [6.1]

Waste materials generated by stores andindustrial waste generated at times ofstore closures and remodeling 5

0.59% [27.7]

Disposal of containers, disposable
chopsticks and plastic shopping bags 5

Category 3

Category 4
Scope 3(other indirectemissions)Electricity
consumption
by franchise
stores 5

23.46%[1,109.3]*
Stocked raw materials 1 2(Private and national brand products,
plastic shopping bags, etc.)

0

75.9

74.0
78.5

4

Waste generated by stores & industrial
waste generated at times of store
closures and remodeling 5

27.7
0.5

Business trips by headquarters employees 7

Electricity consumption associated withprocurement of electric power

Category 12

Disposal of containers, disposable
chopsticks and plastic shopping bags 5

Electricity consumption by headquarters,
areas, regional offices, branch offices andCompany-operated stores 5 7

1.60% [75.9]

Energy consumption bydelivery centers 3 4

1.66% [78.5]* Figures in brackets [ ] indicate CO2 emissions(thousand tons)

69.87%[3,303.4]*

Category 14 (Franchise stores)

Electricity consumption by franchise stores 5

MART (12,723 stores), purchased goods andservices for store sales

TargetperiodFrom April 1, 2014 to March 31, 2015
(administrative year)

Targetitems

Gasoline consumption by Company vehicles,
electricity consumption by stores and CO2
emissions from purchased goods and services

Scope of compilation: Lawson headquarters and franchise stores* (Thousand yen)

Descriptions of principal activities(1)-1 Pollution prevention Maintenance and management of
costs
septic tanks at new stores(1)-2 Global environmental Implementation of energy-efficient
preservation costs
equipment, CO2 offsetting activities(1)-3 Resources recycling Waste materials-related expenses*2
costs(2) Upstream and downstream costs
Containers and Packaging Recycling
Law-related expenses(3) Management operations costs
Preparation of environmental reports,
ISO 14001 assessment expenses

Total

Energy-conserving stores’ research expenses
Afforestation activities, cleaning activities,
donations to non-profit organizations

1

Investment
amount09,314,703
000009,314,703

Expenseamount20142020 (FY *2)

Effectsof water
3,056 Prevention
contamination
50,390 CO2 reduction
with laws
5,789,735 Complianceand regulations
with laws
616,730 Complianceand regulations
Promotion, dissemination
6,270 and education related toenvironmental activities
7,344 CO2 reduction
preservation,
54,904 Biodiversity
regional beautification
6,528,429*1 Including domestic franchise stores and LAWSON STORE100 stores.
*2 Expenses for waste disposal and recycling at stores are estimated based on values for standard stores employed as sample figures.

Electricity consumption
by refrigeration equipment

Total electricity consumption per store

0

Medium-term targets to fiscal 2020

Reduction of per-store electricity consumption
by 20% compared with fiscal 2010.
*1: CO2 emissions derived using adjusted coefficients for receiving-end terminals
published by the Federation of Electric Power Companies of Japan. The figures
for fiscal 2020 are estimated based on coefficients for fiscal 2013.
*2: Calculated for the year from April 1 to March 31 to coincide with theadministrative fiscal year.

Reduction and recycling of food waste

39

CO2 coolant freezing andrefrigeration system
Potential per-store CO2
emissions reduction of 50%
and electricity consumption
reduction of 12% comparedto emissions fromconventional equipment.

Transition in number of stores implementing the Lawson Group’s food recycling activities

Food waste discarded daily by individual LAWSON stores includes 7.9
kg of boxed lunches with expired sell-by dates*1 (surplus food) and2.1 kg of cooking oil (waste oil) used in fast-food preparation, a total of
10.0 kg*2. Lawson’s activities are intended primarily to suppress waste
generation and encourage recycling (recycling of waste oil, conversion of
surplus food into animal feed and fertilizer) to reduce the volume of waste
foods. These efforts led to a food-recycling ratio of 44.7% in fiscal 2014,
well above the regulatory target of 36.5%.
*1 Sell-by date: A date determined voluntarily in advance on which products are removed from the
shelves to ensure that customers purchase them while they are still assured safe.
*2 The weights for food waste are the actual results of food-recycling efforts conducted byapproximately 2,400 stores.

Greenhouse Gas
Emission Verification
Statement(1) Businessarea costs(4) Research and development costs(5) Social activity costs

1,109.3

Scope of Use of Company vehicles, LAWSON, NATURAL
inspection LAWSON, LAWSON STORE100 and LAWSONTest period: March 1, 2014 to April 28, 2015
Classification

52.9

CO2 emissions calculation rules

Method of calculating greenhouse gas emissions in supply chain
Calculations based on “Explanations by Industry (Retail Industry) for the Basic Guidelines on Accounting
for Greenhouse Gas Emissions Throughout the Supply Chain,” Ver. 1.0.

Social and environmental
preservation costs
Activities related toenvironmental preservation
involve costs. Lawson isinvestigating the amounts of
its investments and expenses
for environmental preservationfor each phase of its business
operations to compare themwith the effects to determine themost appropriate methods.

3,303.4

Stocked raw materials 1 2

2010

Refrigerationequipment

60

6.1

Category 6 (Business trips)(Disposal of products)

Target68.2

27%
reduction

80

Electricity consumption by corporate
headquarters, areas, regional offices, branch
offices and Company-operated stores 5 7

1.12% [52.9]
1.56% [74.0]

80.0

Gasoline consumption by Company vehicles. 6

Energy consumption(Waste generated by business operations)

91.1

88.8

20

(tons)

Refrigerationequipment

100

20(Upstream transportation and delivery) by delivery centers 3

Category 5

101.2

120

CO2
emissions

Energy consumption associated withelectric power procurement(Fuel- and energy-related activities
not included in Scopes 1 and 2)

100.0

12%
reduction(t-CO2)40

Description

Scope 2

Base year

CO2 emissions volume(right axis)

40

Category

Total CO2 emissions

Annual electricity consumption index(left axis)

80* The numbers placed after CO2 correspond to those in the pie chart below.

Per-store electricity consumption by conventional equipment

Per-store electricity consumption (index) and CO2 emissions*1(%)

CO2 1 *
Waste materials
Effluent

This type of leading-edge energy-efficient equipment is verified
through experimental use at selected energy-conservation stores,
and the equipment that proves especially effective is then installed inregular stores. New experimental stores are being established eachyear, moreover, to verify new equipment with the aim of achieving
further energy conservation and CO2 emissions reductions.
We comply with the Ten Energy-saving Rules, meanwhile,cleaning the filters and maintaining recommended heating andcooling temperature settings and improving the operating efficiencyof our main cooling and climate-control equipment to reduce
wasteful overall electricity consumption by stores.

(Number of stores)(%)

15,000

170

100

2,292

2,475

80

10,46847.6

11,059

32.5

34.5

36.5

2012

2013

2014 (FY)*2

155
12,000

2,248

9,000

906

6,000

7,403

3,000
0

22.5

2007
(Base year)
Waste oil recycling (left axis)

9,875

164

44.7

50.3

60
40
20
0

Conversion to animal feed
Heat recovery (right axis)
and fertilizer (left axis)
Rate of implementation of activities
Regulatory target (right axis)
such as food recycling*1 (right axis)*1: Figures for the implementation rate of food recycling activities exclude figures for Lawson Okinawa, Inc.
and Lawson Minami-Kyushu, Inc.
*2: Calculated for April 1 to March 31 to coincide with the administrative fiscal year.

Substantiating fund-raising activities at stores. Donations for fund-raising activities can be made using store terminals.
Fund-raising activities intended to contribute to a sustainable society are
Organizations receiving donations*LawsonGreen Fund

SupportDreams Fund

(Scholarship program foryoung victims of the Great
East Japan Earthquake)

Recipient: The National Land
Afforestation Promotion Organization

Recipient: Civic Force (public interest
incorporated association)

TOMODACHI Fund

Support for Japanese Red Cross Society
Activities
Collection of donations for the Great East
Japan Earthquake Contribution Fund

Recipient: U.S.-Japan Council (Japan)

Recipient: Japanese Red Cross Society(Support for students in Japan’s Tohoku
region through U.S.-Japan educationaland cultural activities)(Two types of donations possible)* A limited-period disaster contribution fund may be established when large-scale disasters strike.
*Among the recipient organizations, the Japanese Red Cross Society is permitted to receive only
disaster relief funds and donations made through Loppi terminals.

conducted through the Lawson Group “Happiness in Communities” fundraising activity at about 12,000 Group stores, a program supporting children,
who will bear the responsibilities of thenext generation, as well as throughour Greening Contribution Projects. In
addition to support activities conductedby placing fund-raising donation
boxes at stores, we also introduced adonation acceptance service using the“Loppi” in-store multimedia terminal on
February 2, 2015. Our customers canuse this service to donate easily to acharitable organization of their choice.

Developing Human Capital

Lawson’s human capital concept

Promoting diversity

Development of human capital that contributes to corporate growth through self-motivation and innovation

40

Both our Corporate Philosophy and our Code of Conduct formulated
to contribute to its achievement have been implemented positively
and systematically, with accompanying efforts to develop humancapital to become core participants in activities to this end.
The image of human capital Lawson seeks to realize is of
personnel capable of manifesting the Company’s values throughteamwork, continuous innovation to create value and determinedaction to achieve goals. The key behavioral characteristics of these
personnel are self-motivation and innovation.
We have introduced a personnel development program to train
all our employees to become more self-motivated and innovative.
This equips them to identify appropriate employee behavior forachieving the Corporate Philosophy and for fulfilling their individual
duties in order to complete their objectives for the year.
We have also developed an employee behavior and skill levelevaluation program under our personnel management system withthe aim of creating a culture that encourages self-motivation andinnovation among employees. The program also seeks to clarify thescope of their responsibilities and the roles they must play to fulfill theduties of their respective posts. The manner of fostering employees
as human capital is determined based on two evaluations: anevaluation of their behavior on the job and an evaluation of thebusiness results they achieve.
We employ a Career Development Sheet to ensure employees’
ability to determine their own career paths, and individual employees
are also asked to specify their goals for the future in light of theirpersonal histories and current positions. Interviews are conducted tosupport their growth as individuals.

Employing a diverse range of human capital, including women and foreign nationals
Lawson promotes diversity in its human capital to create an organization in which
individuals with various characters and values can make full use of their abilities. An
officer in charge of diversity promotion reporting to the CEO cooperates with the
Human Resources Division in promoting the design, operation and arrangementof necessary programs. Besides proactively recruiting female and foreign
national employees, we have established a special subsidiary to promote wideranging diversification of our human capital. We have also established avenues
for conducting labor-management consultations on ways of improving work
efficiency and the working environment. Dialog meetings have been conductednationwide to raise awareness of diversity, moreover, as part of efforts to create anenvironment in which widely diversified employees can work comfortably.
We are promoting employment of women, for instance, by creating
structures that make it easier for them to raise children while continuing to pursue
careers in the Company. These efforts have included introducing leadershiptraining and offering information about the Company to employees who areon child-rearing leave as well as conducting training on career formation after
employees return to work. We have also been operating day-care facilities at ourbusiness establishments since 2014. Our target is to raise the ratio of female
managers to 30% by fiscal 2020 through initiatives of this kind.

Sustainable Company growth
Corporate
Philosophy

Mission for the
fiscal year

Self-motivated and innovative
human capital[Individual employees][Superiors]

Self-motivated andinnovative

Education ofsubordinates

Declaration of promoting active participation by women

Declaration of intent
Lawson declares its intention of promoting active participation
by women in its commitment to human capital diversity.
Lawson shall strive to cultivate personnel who exhibit selfmotivation and innovation. Lawson shall continue to recruit adiverse range of employees, beginning with women and foreign
nationals, and to maintain an environment in which they can allparticipate actively while guiding their development. We shallcontinue our proactive promotion of active participation by womenas a means of improving our corporate value.
Genichi Tamatsuka,
President and CEO, Lawson, Inc.

Two years consecutive selection as a Nadeshiko Brand andfirst selection for Diversity Management Selection 100

Personnel Development Program
For the second year in a row, Lawson
has been chosen as a Nadeshiko Brand,
a program that recommends publicly
listed companies that make superior
efforts to promote active participation by
women to investors.

Code of Conduct

We were the first convenience store to
be selected by Diversity Management
Selection 100, a project that honors
companies that make full use of adiversified range of human capital.

Activities contributing to the health of employees and franchise owners
Groupwide organizational health and productivity management

	The franchise store and headquarters employee education programs have been integrated to establish
Lawson University, a resource that enables personnel to acquire specialized skills
As a Lawson division specializing in education, Lawson
University integrates education for franchise store andheadquarters employees to facilitate their acquisition of
the highly specialized skills necessary to personnel in theirrespective positions in accordance with Lawson’s corporate
and business strategies. Lawson University’s ultimate goal isto ensure that all franchise store and corporate headquarters
employees develop into self-reliant individuals who think
independently and act on their own initiative to help structure abusiness model as a next-generation convenience store.
For this reason, continuous, systematic support isprovided for all our human capital based on a long-term vision.

Overview of Lawson University (Genichi Tamatsuka, President)
Continuous and systematic support
Before opening

After opening
Support for multiple
store development

MO management support

OwnersTraining according
to years in business(1 or 2 years)

Multiple store
management training

MO (management owner)candidate training

BMC(Basic Management
Course) training

Full-time
employees

Store manager
candidate training

Multiple store
manager training

SC (store consultant)candidate training

OthersContract renewal

Training prior
to renewal

Various training
Various types of training, such as store crew training aimed at crew leader development
and training when new operations are installed, are offered at appropriate times.

Guidance and support
Headquarters
employees

Basic knowledge

Basic MBAknowledge

MC* standard

Management
know-how

Awarenessinnovation

Entry toLawson management

LawsonManagement Basics

MC appointment training
MC candidate training

LawsonManagement Course

Executive
Management Course*MC: Management consultant

Skill enhancement for giving
customers added value

Franchise stores

Fundamentals II

Fundamentals I

健康経営銘柄ロゴ

縦組

Acting from a conviction that becoming a business that contributes tothe health of its customers begins by promoting health internally, we are
implementing actions to promote employee health. The completion ofagreements between labor and management to enhance work efficiency
and eliminate excessive working hours and the establishment of acooperative health union have created a mechanism for sustaining thelong-term health of our employees.
Since October 2012, these efforts have included enhancing
our employee health promotion measures to create an environment inwhich employees find it easier to participate in health checkups. Thosefor whom further testing is recommended according to the relevant
guidelines (those in the consultation recommended category) are directed
to check into a hospital to undergo a complete medical examination.
We also began issuing Lawson Healthcare Points in April 2015. These
activities represent collaborative efforts by the Company, the labor
union and the health union to raise awareness of health and motivate
employees to protect and improve their health.
Lawson also considers promoting the health of franchise owners
important. It provides an assistance program for medical examinations
and health support through the Lawson Owner Welfare Association,
which is operated in a spirit of mutual aid by franchise owners.

The Lawson Owner Welfare Association
The Lawson Owner Welfare Association provides franchise
stores with a range of welfare benefits based on the threeprinciples of “comfort,” “health” and “peace of mind.” Theassociation offers a variety of benefits in addition to its programfor supporting health.
Use of sports clubs at member prices
Convenient travel and accommodation services
Assistance programs for child-rearing and nursing care	Seminars supporting interaction among franchise stores and with
headquarters	Assistance program for correspondence education and healthmanagement
	Discount and priority programs for facilities providing such lifestylerelated services as gourmet meals and leisure activities
	Celebration and condolence allowance programs
	Insurance programs for franchise stores (insurance to compensate
store crew for incidents occurring at work or while commuting)	Establishment of a hotline for psychological care, others

Designation as a Health & Productivity Stock Selection

Lawson was listed as a Health & Productivity Stock
Selection for fiscal 2014, an honor that introduces
investors to a select group of businesses that are
engaged in strategic actions toward employee healthmanagement from the management perspective.

A Lawson Owner Welfare Association pamphlet (left) and a seminarconvened by the Welfare Association to promote health (right)

41

Corporate GovernanceLawson’s corporate governanceCorporate governance system
General Meeting of Shareholders

Characteristic features of corporate governanceLawson has built an agile, highly transparent corporate
governance system ahead of other companies.
First, we have clarified the responsibilities of managementby adopting the executive officer system to separate thebusiness execution and management functions and introduceda system employing only a small number of directors tofacilitate speedy decision-making on management matters.
Eight of the 12 directors and auditors are from outside theCompany, moreover, and six of these are independent officers.*
We have considered the composition of the independent
officers from the perspective of diversity, moreover, byappointing a total of four women as directors and auditors in
Number of directors

an effort to reinforce the corporate governance system fromvarious perspectives. To enhance management transparency
further, the Compensation Committee was reorganized into
the Nomination and Compensation Committee in accordancewith a resolution passed at a meeting of the Board of Directors
following the General Meeting of Shareholders on May 27,
2014. The Committee comprises four outside directors andtwo outside auditors. As a company with a board of auditors,
Lawson has a dual checking function involving supervision ofbusiness execution by the Board of Directors and auditing of
the directors’ business execution by the auditors.

Nomination andCompensation Committee

Consultation
Recommendation

Board of Directors
Outside Directors
5(Of which, three independent officers)
Directors
3
Total number of directors 8

Appointment/removal/supervision

Business execution
organization

Appointment/removal

Ratio of female officers

Audit

2000

2014

Outside18%

Of which,
independent
50%

Financial audit

Management meeting

2000

2014

(FY)

CR management *Lawyers

Compliance &Risk Management Committee

Opinions

Formulation and promotion of complianceand risk management measures

Funding

2000

43

Affiliated companies

2014

(FY)

(1)	Reduction of number of directors toless than half(2)	Reinforced independence through anincreased ratio of outside officers(3)	Active appointment of female
officers

In order to separate management frombusiness execution and achieve agile
managerial decision-making by a Board of
Directors with a small membership, the numberof directors has been limited to fewer than 10
since 2002.

Increasing the ratio of outside officers with diverse
backgrounds who bring a high level of expertiseto their office has produced a system capableof verifying the appropriateness of businessexecution and supervising the observance of laws
from an independent, objective viewpoint.

Stressing diversity in its management, theCompany is proactive in its appointment of female
officers. We also make ongoing efforts to promote
other female employees’ career advancement,
increasing the ratio of women in managerial
positions.

Corporate governance measures in place before implementation of the industry-wide Corporate Governance Code (measures as of end February 2015)
Basic rules

Certified public accountant

PresidentInternal audit and guidance
for improvement

0%
(FY)

Audit
RemovalAudit

Discussion/report

Business/corporate divisions

42

Outside auditors
3(Of which, three independent officers)
Inside auditors
1
Total number of auditors
4

Financial Reporting
Internal Control Committee

Internal Audit Office33%

Outside67%

8

Appointment/removal

Board of Corporate Auditors*The introduction of independent directors began in 2010.

Composition of outside officers

18

Appointment/removalState of internal control system development
Recognizing the importance of an internal control system
to effecting sound and continuous business growth, weestablished the Basic Policy for Maintaining Internal Control
Systems for each fiscal year in accordance with stipulationsof the Companies Act, Ordinance for Enforcement of theCompanies Act and the Financial Instruments and ExchangeAct. (See page 33.)
To ensure the effectiveness, efficiency and appropriatenessof our operations, we conduct ongoing reviews of the Policy
in response to changes in the management environment andstrive to maintain/increase our corporate value through efforts
to create an effective and rational internal control system.

Individual cases and actions by the Company

1.	Rights and equality ofshareholders

Notices of shareholders’ meeting are sent three weeks prior to the Ordinary General Meeting of Shareholders andpublished on the website in both Japanese and English one week before the mailing. The Company employs an electronic
voting system to facilitate voting, moreover, adopting the platform employed by the Tokyo Stock Exchange. Exit polls
are conducted at the meeting venue, and voting results for proposals, including the results for all shareholders attending
the meeting, are disclosed in an extraordinary report as information for reference purposes. A proposal concerning
appropriation of retained earnings clearly states the dividend policy as well as showing data such as transitions in dividends
and the ROE in an easily understandable manner supported by graphs.

2.	Appropriate collaboration
with stakeholders otherthan shareholders

We seek to instill our corporate philosophy, “Creating Happiness and Harmony in Our Communities” with its emphasis onvalue creation with various stakeholders, in the minds of all our employees by having them recite it in chorus at morning
assemblies. We have also introduced a whistle-blower system that permits consultation with both in-house and outside
attorneys and presents reports to the Board of Directors. (See page 33 for details.)

3.	Ensuring appropriate
information disclosure andtransparency

To fulfill our corporate social responsibility (CSR) and achieve corporate governance, we have developed our Basic
Principles Concerning Information Disclosure (“the Principles” hereinafter) based on the Basic Rules on Information
Disclosure. The Principles are posted on the website to disseminate the Company’s perspective on information disclosure.
(See the website for details.)

4.	Board of Directors’
responsibilities

The Nomination and Compensation Committee makes recommendations to the Board of Directors concerning directors’compensation. (See page 44.) Five outside directors (including three independent officers) supervise management fromvarious perspectives. Three of the four auditors are independent officers who conduct highly independent audits ofthe execution of management. The outside officers, who include a CPA and a former member of the Board of Audit ofJapan, are selected for their specialized knowledge in fields from business management to academics. In considerationof diversity, we have appointed three women to the position of director and one to the position of auditor. The Board of
Directors’ executive office, which serves as a contact office for the outside officers, is equipped with a system for providing
necessary information on matters other than agenda items discussed by the the Board of Directors. The auditors aresupported by two staff members who provide them with necessary information and coordinate their activities. Candidates
for appointment as officers receive explanations concerning the Company’s situation and other requisite information fromthe Board of Directors’ executive office, which allows candidates to participate in outside seminars as necessary.

5.	Dialog with shareholders

The President himself engages actively in dialogs with domestic and overseas institutional investors, and the Company
has earned a good reputation in the business community, as exemplified by its receipt of the IR Grand Prix Award from theJapan Investor Relations Association. We support the effectiveness of our IR activities by conducting an annual shareholder
identification survey to determine the composition of shareholders. We also explain our management strategy at a financial
results briefing and publish the information presented on our website.

Special circumstance with the potential to seriously impact corporate governance
Mitsubishi Corporation holds 32.4% of Lawson’s total voting
rights (including indirectly held shares), which makes Lawson an
equity-method affiliate of Mitsubishi Corporation (as of February
28, 2015). Based on its comprehensive business alliance with
Lawson, Mitsubishi cooperates with the Company in humanresources exchanges and raw materials procurement as wellas through information-sharing. As a listed company, however,Lawson makes management decisions independently.

 oard of Directors and Board of Auditors meetings heldB
and attendance rates (fiscal 2014)
Number of meetings held (ofwhich, extraordinary meetings)
Attendancerate*

Board of Directors

Board of Auditors

13 times(of which, 3)

16 times(of which, 3)

Outside directors

87%—

Outside auditors

97%

100%

*Attendance rates include extraordinary meetings.

Corporate Governance

Basic policy for determining directors’ compensation
Lawson’s policy is to design its remuneration system in amanner that links directors’ compensation with shareholder
returns, while retaining its function as an incentive forenhancement of corporate value, continuous growth andimprovement of corporate performance and ensuring anappropriate level of remuneration to reward individual directors
for the duties they perform. The base compensation includes a“variable compensation” component linked to the Company’s
performance, moreover, as well as a fixed compensation
component. To reflect the directors’ contribution to improving
shareholder value more accurately, variable compensation islinked to such earnings indicators as EPS (consolidated net
profit per share). Share-based stock options—share pricelinked compensation—are also incorporated as part of the
remuneration to strengthen the linkage with shareholder returns.

Details of directors’ compensation
Directors’ compensation paid by Lawson consists of (A) basecompensation through cash payments and (B) share pricelinked compensation through stock option allocation.

A

B

Directors’ compensation

A Base compensation

44

Fixed compensation(about 60%)+

Variable compensation(about 40%)

Fixed compensation: A fixed amount commensurate with the position determinedbased on internal rules
Variable compensation: Performance-based remuneration linked to theCompany’s performance in each fiscal period, including EPS, etc. (to ensure
linkage between directors’ compensation and shareholder returns)

Details of auditor’s compensation

Judgment criteria regarding independence

It is our basic policy to allocate auditors an appropriate level of
remuneration to reward them for their performance of duties.
The remuneration is made in the form of base compensation(fixed compensation) through cash payments. Amounts are
determined based on discussions among the auditors withsuch factors as the circumstances of their position (standingor part-time) and the allocation of auditing responsibilities,
and is within the range of the remuneration determined by aresolution adopted at the general meeting of shareholders. As
for retirement benefits, the program was abolished and thedecision reached to make a termination payment covering pastbenefits in a resolution adopted at the 37th ordinary General
Meeting of Shareholders held on May 29, 2012.

We enhance corporate governance by appointing outside directors andauditors who meet the judgment criteria. Selections not only comply
with the judgment criteria regarding independent officers specified by
the Tokyo Stock Exchange’s listing rules, but they also reflect rigorous
vetting of the candidates to assure their freedom from any “potential
conflict of interest with the general shareholders.”

Means of disclosure of compensation
The total compensation paid to all officers is presented in the
Company’s securities report and business report.
Details of directors’ and auditors’ compensation (fiscal 2014)

Directors (of which, outside directors)

10 (5)¥324 million (¥48 million)

Auditors (of which, outside auditors)

4 (3)¥70 million (¥46 million)

Total

14

¥395 million(Notes)1.	As of fiscal 2014 year-end, the numbers of directors and auditors were 8 and 4,
respectively.
2.	The above figures include 1 director who resigned at the conclusion of the 39th ordinary
General Meeting of Shareholders held on May 27, 2014 and 1 director who resigned on
July 31, 2014.
[Reference]
In addition to the above, the Board of Directors adopted a resolution at their meeting ofMarch 25, 2015 to pay 8 directors (of which, 5 outside directors) ¥130 million (of which,¥10 million to outside directors) as share price-linked compensation for fiscal 2014 in theform of stock options.

B Share price-linked compensation

Stock options offered through allocation of shares(Recognized as compensation linked to mediumand long-term improvement in corporate value)

Stock option exercise price per share: ¥1
Number of shares allocated: Determined according to the director’s position
Exercise period: Options can be exercised only during a designated period
after retirement. (Options cannot be exercised during a director’s term in office.)

Performance-linked variable compensation is not paid to fivenonexecutive directors—Reiko Okutani, Takehiko Kakiuchi,
Emi Osono, Yutaka Kyoya and Sakie Akiyama—who perform
specialized functions involving supervising and advising therepresentative directors and Board of Directors.

	Contributions of independent officers to the Boardof Directors and Board of Auditors

To increase management transparency, directors’ compensation
is determined at a meeting of the Board of Directors basedon recommendations by the Nomination and Compensation
Committee composed exclusively of outside officers.

Directors Reiko

Okutani

As a scholar, Emi Osono draws on her in-depth knowledge ofcompany management and global management strategy as
well as of organizational behavior to raise questions and offer
informed opinions. She also serves as vice-chairman of theNomination and Compensation Committee.

Sakie
Akiyama

Sakie Akiyama draws on her extensive experience andknowledge as a business manager to raise questions andoffer informed opinions. She also serves as a member of theNomination and Compensation Committee.

Auditors Shinichi

As the standing corporate auditor, Shinichi Hokari inspects
documentation and visits business partners’ offices to inspect
the state of their business operations and assets in addition
to supervising and verifying the directors’ execution of duties,
including improvement of the internal control system.

HokariNomination and Compensation Committee members

Sakie Akiyama
Outsideauditors

Tetsuo Ozawa (Chairman)
Eiko Tsujiyama

Recommendations

Determination of directors’compensation

Emi Osono (Vice-chairman)

Board of Directors

Takehiko Kakiuchi

Reiko Okutani draws on her extensive experience andknowledge as a business manager to raise questions andoffer informed opinions. She also serves as a member of theNomination and Compensation Committee.

Emi Osono

Nomination and Compensation Committee

Outsidedirectors(1)	Engaged in business operations of the Company’s parent company(2)	Engaged in business operations of the Company’s sister companies(3)	Transacting business with the Lawson Group as a main business partner
or engaged in such business operations(4)	Transacting business with main business partners of the Lawson Group’s
or engaged in such business operations(5)	A consultant, accounting professional or legal professional who receives
large payments or property [benefits] other than director’s compensationfrom Lawson(6)	A major shareholder of the company (if the major shareholders is a
corporation, a person engaged in the business operations of suchcorporation)(7)	A person with close family members who are engaged in the business
operations of the Lawson Group(8)	A person with close family members who are non-executive directors or
accounting advisors of the Lawson Group (if the independent officer is an
outside auditor)

Of special note, Lawson’s judgment criteria for independence adopt
such stringent standards as 1) defining “major business partners”
in criteria 3 and 4 above as “business partner groups whose totalbusiness transactions with the Lawson Group during the most recent
fiscal year accounted for 2% or more of the consolidated net sales (grossoperating revenues) of said business partner groups or the Lawson
Group” and 2) defining “large payments” in criterion 5 as “receiving
remuneration of ¥5 million or more per year during the past two years.”

Outline of liability limitation agreement
Lawson has concluded a liability limitation agreement with its directors(excluding executive officers, etc.) and auditors as specified in Article
423, Paragraph 1, of the Companies Act. The limit on the amount ofliability based on the agreement is the total sum of the amount set forth
in all items of Article 425, Paragraph 1, of the Companies Act.

Independent officers

Process of determining directors’ compensation

Reiko Okutani

NumberTotal compensation, etc.
of officers

Category

Judgment criteria (candidates with none of the below characteristics)

TetsuoOzawa

Tetsuo Ozawa draws on his extensive experience andknowledge as an attorney to raise questions and offer
informed opinions. He also serves as chairman of theNomination and Compensation Committee.

Eiko
Tsujiyama

Eiko Tsujiyama draws on her extensive knowledge of financeand accounting as a university professor (accounting) to raisequestions and offer informed opinions. She also serves as amember of the Nomination and Compensation Committee.

General Meeting of Shareholders
Recognizing the opportunity afforded by the General Meeting of
Shareholders to raise shareholders’ understanding of the Company,
Lawson was a leader in promoting disclosure.
Since 2001, shortly after its public listing in 2000, Lawson has
sought to conduct early mailings of notices of shareholders’ meetings inboth Japanese and English and has conducted voluntary disclosure on
its website.
In 2002, we disclosed the total amounts paid as retirement
benefits to executive officers and corporate auditors under a programin force at the time and introduced on-demand Internet distribution toprovide shareholders who are unable to attend general meetings ofshareholders with explanations of the meeting contents. This was also
the year in which we received the Tokyo Stock Exchange’s DisclosureAward.
In 2009, we introduced electronic voting using the Tokyo Stock
Exchange’s platform for the electronic exercise of voting rights.
We also voluntary disclosed the results of the execution of voting
rights earlier than other companies before such disclosure was legally
mandated.
In 2012, Lawson published its judgment criteria for determining
the independence of independent directors in a notification of theGeneral Meeting of Shareholders. It also presented transitions in ROE(return on equity) over time as reference information in its statementof appropriation of surpluses to communicate Lawson’s recognition
of ROE as an important indicator of management. The Company
conducted a questionnaire survey of individuals attending shareholders’meetings, moreover, to confirm their voting on matters for resolution
and began publishing the survey results on the website as part of an
extraordinary report.
In 2013, we announced the contents of the notification of theGeneral Meeting of Shareholders early by posting the notification on thewebsite six days before mailing it.
YearContent

2001

	Early mailing of the shareholders’ meeting notification, preparationof an English version, voluntary publication on the website

2002	Disclosure of the total amount paid as retirement benefits to
executive officers and corporate auditors
	Introduction of on-demand transmission of contents of theGeneral Meeting of Shareholders; receipt of Tokyo Stock
Exchange’s Disclosure Award

2009

	Introduction of electronic exercise of voting rights; adoption of
the Tokyo Stock Exchange’s platform (ICJ)	Disclosure of results of exercise of voting rights (voluntary
disclosure)2011	Change in the venue of the General Meeting of Shareholders (toTokyo International Forum)

2012	Disclosure of judgment criteria for independence of independent
directors; publishing of transitions in ROE over time	Questionnaire survey of General Meeting of Shareholders
attendees and publishing of the survey results in an
extraordinary report and on the website.

2013	Posting of shareholders’ meeting notifications on the website (sixdays) before mailing

Promotion of IR activities
To promote understanding among investors and shareholders of theavenue to continuous growth and corporate value creation, Lawson
has established an IR Department that engages in constant dialog withinvestors concerning Lawson’s management strategies and financial
performance. Management takes the lead in making appropriately
timed information disclosures, not only by holding semiannual financial
results briefings for analysts and institutional investors, but also throughconference calls with the CFO at the times of quarterly settlements.
Placing a priority on fairness in our disclosures, moreover, we post
information disclosures and other important information and materials
distributed at the financial results briefing promptly on the website, whileworking quickly to disclose information in English for foreign investors.
These disclosure policies are also published on the website as “Basic
Principles Concerning Information Disclosure.”
Lawson’s IR activities are highly acclaimed by the capital
market, both for their expression of a management strategy stressing
sustainability and capital efficiency and for their aggressive approachto disclosure in accordance with the basic principle of “creation andimprovement of shareholders’ value.”
In fiscal 2013, Lawson was selected for the 18th Excellent
Company Award from the Japan Investor Relations Association (JIRA)
for the first time, and placed first in the retail sector among “companies
selected by securities analysts for superior disclosure policies”
published by the Securities Analysts Association of Japan for the third
straight year (eighth time). The Company was also honored with the“2nd WICI Japan Award for Excellence in Integrated Reporting” for thesecond consecutive year and with an Honorable Mention in the “Nikkei
Annual Report Awards 2012” sponsored by Nikkei Inc.

45

Corporate GovernanceDirectors, Corporate Auditors and Executive Ofﬁcers(As of June 1, 2015*)

Genichi Tamatsuka

Sadanobu Takemasu

President and CEO, Representative Director

Senior Executive Vice President, Representative Director, Corporate Management and Lawson
Store 100 Business, and Division Director, Corporate Sales and Store Development DivisionYears as a director: 3
Number of Lawson shares held: 3,500
1985
1998
2002
2005
2010
2011
2012
2013
2014

2015

Years as a director: 1
Number of Lawson shares held: 100

Joined Asahi Glass Co., Ltd.
Joined IBM Japan Ltd.
Joined Fast Retailing Co., Ltd.
President, Representative Director and COO, Fast Retailing Co., Ltd.
Established Revamp Corporation
President, Representative Director and COO, Revamp Corporation
Corporate Advisor, Lawson, Inc.
Senior Executive Vice President and COO, Group CEO, CVS Operating Group, Division Director, Food Service
Division, Lawson, Inc.
Member of the Board, Senior Executive Vice President and COO, Group CEO, CVS Operating Group, Division
Director, CRM Promotion Office and Marketing Office, Lawson, Inc.
Member of the Board, Representative Executive Officer, COO, and President, CVS Company and Overseas
Operations Company, Lawson, Inc.
Member of the Board, President and CEO, Representative Director, and President of CVS Company, Lawson, Inc.
Member of the Board, President and CEO, Representative Director, and Division Director, Store Operations Division,Lawson, Inc.
Member of the Board, President and CEO, Representative Director, Lawson, Inc. (Current position)

1993
2002
2005
2010

2014

2015

Joined Mitsubishi Corporation
Transferred to Indiana Packers Corporation Indiana, U.S.A.
Corporate Communications Department, Mitsubishi Corporation
Executive Assistant to Senior Executive Vice President, Corporate Administration Department and Corporate
Strategy & Planning Department, Mitsubishi Corporation
Executive Assistant to President & Chief Executive Officer, Corporate Administration Department and Corporate
Strategy & Planning Department, Mitsubishi Corporation
Senior Executive Vice President, Representative Director, and Division Director, Corporate Sales Division, Lawson
Mart, Lawson, Inc.
Senior Executive Vice President, Representative Director, and Division Director, Corporate Sales and Store
Development Division, Lawson Mart and Lawson Store 100 Business, Lawson, Inc.
Senior Executive Vice President, Representative Director, Corporate Management, and Lawson Mart and Lawson
Store 100 Business, and Division Director, Corporate Sales and Store Development Division, Lawson, Inc.
Senior Executive Vice President, Representative Director, Corporate Management and Lawson Store 100 Business,and Division Director, Corporate Sales and Store Development Division, Lawson, Inc. (Current position)

46

47
Masakatsu Gonai

Executive Vice President, Member of the Board—
Compliance and Risk Management and Human Resources,
Division Director, Franchisee Business Support DivisionYears as a director: 1
Number of Lawson shares held: 1,100

Reiko Okutani

Takehiko Kakiuchi

Emi Osono

Yutaka Kyoya

Sakie Akiyama

Atsuhiko Seki

Shinichi Hokari

Tetsuo Ozawa

Eiko TsujiyamaYears as a director: 13
Number of Lawson shares held: 100

Years as a director: 10
Number of Lawson shares held: 400

Years as a director: 3
Number of Lawson shares held: 200

Years as a director: 2
Number of Lawson shares held: 0Years as a director: 1
Number of Lawson shares held: 0Years as a corporate auditor: 5
Number of Lawson shares held: 1,200

Years as a corporate auditor: 3
Number of Lawson shares held: 0Years as a corporate auditor: 12
Number of Lawson shares held: 400

Years as a corporate auditor: 4
Number of Lawson shares held: 400

1979 Joined Mitsubishi
Corporation
2001 Unit Manager, Foods(Commodity) Division,
Mitsubishi Corporation2005 Member of the Board(Outside), Lawson, Inc.
(Current position)
2006 General Manager, Living
Essentials Group CEO Office,Mitsubishi Corporation
2008 Division COO, Foods(Commodity) Division,
Mitsubishi Corporation2010 Senior Vice President,
Division COO, Foods(Commodity) Division,
Mitsubishi Corporation2013 Executive Vice President,Group CEO, Living
Essentials Group, Mitsubishi
Corporation (Current
position)
2014 Member of the Board(Outside), Mitsubishi
Shokuhin Co., Ltd. (Current
position)

1988 Joined Sumitomo Bank
(Currently Sumitomo Mitsui
Banking Corporation)
1998 Assistant Professor, Instituteof Asia-Pacific Studies,
Waseda University
2000 Assistant Professor,
Graduate School ofInternational Corporate
Strategy, Hitotsubashi
University
2002 Associate Professor,
Graduate School ofInternational Corporate
Strategy, Hitotsubashi
University
2010 Professor, Graduate Schoolof International Corporate
Strategy, Hitotsubashi
University (Current position)2011 Outside Director, Resona
Holdings, Inc. (Current
position)
2012 Member of the Board(Outside), Lawson, Inc.
(Current position)

1984 Joined Mitsubishi
Corporation
2008 General Manager, Grain Unit,
Foods (Commodity) Div.,
Mitsubishi Corporation2011 Deputy General Manager,
Living Essentials GroupCEO Office, Mitsubishi
Corporation2012 General Manager, Global
Consumer Business
Development Unit, Mitsubishi
Corporation2013 Division COO, Foods(Commodity) Div., Mitsubishi
Corporation
Member of the Board(Outside), Lawson, Inc.
(Current position)2014 Senior Vice President,
Division COO, Living
Essential Resources Div.,
Mitsubishi Corporation(Current position)2015 Member of the Board(Ouside), Rokko Butter Co.,
Ltd. (Current position)

1987 Joined Arthur Andersen &Co. (Currently Accenture
Japan Ltd.)
1994 Founded Saki Corporation
and assumed position ofRepresentative Director andCEO (Current position)2014 Member of the Board(Outside), Lawson, Inc.
(Current position)

1977 Joined The Daiei, Inc.
1999 Joined Lawson, Inc.
2000 General Manager, General
Affairs Dept., Office ofBusiness Planning, Lawson,
Inc.
2002 Deputy General Manager,
General Affairs Office,Lawson, Inc.
2004 Division Director, General
Affairs Office2007 Deputy Senior Vice President,
Division Director, Franchisee
Support Office, Lawson, Inc.
2010 Assistant to Standing
Corporate Auditor, Lawson,
Inc.
Standing Corporate Auditor,
Lawson, Inc. (Current
position)

1975 Joined the Board of Audit ofJapan
1990 Supervisory Manager of 2nd
Bureau, Board of Audit ofJapan
2002 Deputy Secretary General (incharge of 4th Bureau), Board
of Audit of Japan
2005 Director General of 4th
Bureau, Board of Audit ofJapan2007 Chief Audit Commissioner,
Gifu Prefecture Government
2011 Rejoined the Board of Audit
of Japan2012 Retired from the Board ofAudit of Japan
Standing Corporate Auditor(Outside), Lawson, Inc.
(Current position)

1973 Registered as Attornly at Law
and joined Tokyo Fuji Law
Office (Current position)
2003 Corporate Auditor (Outside),
Lawson, Inc. (Current
position)
2007 Outside Corporate Auditor,
CEMEDINE CO., LTD.
(Current position)2014 Outside Corporate Auditor,
Sekisui Chemical Co., Ltd.
(Current position)

1974 Registered as a Certified
Public Accountant
1980 Assistant Professor, Collegeof Humanities, Ibaraki
University
1985 Assistant Professor, Facultyof Economics, Musashi
University
1991 Professor, Faculty of
Economics, Musashi University
2003 Professor, School ofCommerce and Graduate
School of Commerce, Waseda
University (Current position)2008 Outside Corporate Auditor,
Mitsubishi Corporation(Current position)2010 Outside Director of ORIX
Corporation (Current position)2011 Corporate Auditor (Outside),
Lawson, Inc. (Current position)
Outside Corporate Auditor,
NTT DOCOMO, INC. (Current
position)
2012 External Corporate Auditor,
Shiseido Company, Limited(Current position)

Member of the Board(Outside)1980 Joined Lawson, Inc.
1974 Joined Japan Airlines
International Co., Ltd.
1998 General Manager, Third
Kanto Dept., Operations Div,
1982 President, The R Co., Ltd.
Lawson, Inc.
2002 Member of the Board
2001 General Manager, Sales(Outside), Lawson, Inc.
Support Section, Operations(Current position)
Div, Lawson, Inc.
2014 Chairman, The R Co., Ltd.
2002 General Manager, Sales(Current position)
Planning Dept., Marketing
Div, Lawson, Inc.
2005 Division Director of Marketing Div., Lawson, Inc.
2007 Region Director, Kanto LAWSON Office, Deputy Senior Vice President,
Lawson, Inc.
2010 Division Director, Natural Health Care Business Div., Deputy Senior Vice
President, Lawson, Inc.
2012 Executive Officer, Assistant to Chief Compliance Officer (CCO), Lawson,
Inc.
Executive Officer, CCO in charge of CSR Division, Director, Complianceand Risk Management Office, Lawson, Inc.
2014 Executive Officer, Compliance and Risk, Lawson, Inc.
Senior Vice President, Compliance and Risk, Lawson, Inc.
Senior Vice President, Member of the Board—Compliance & Risk
Management, Lawson, Inc.
Executive Vice President, Member of the Board—Compliance and Risk
Management and Human Resources, Lawson, Inc.
2015 Executive Vice President, Member of the Board—Compliance and Risk
Management and Human Resources, Division Director, Franchisee
Business Support Division, Lawson, Inc. (Current position)

Member of the Board(Outside)

Member of the Board(Outside)

Member of the Board(Outside)

Member of the Board(Outside)Standing Corporate Auditor

Standing Corporate Auditor(Outside)

Corporate Auditor (Outside)

Corporate Auditor (Outside)*The number of the Company’s shares held is as of February 28, 2015.

Executive Officers
Senior Executive Vice President

Masahiro Oyama

Merchandising and Group Innovation Officer, Merchandising Management Group

Senior Vice President

Hisashi Yasuhira

Excutive Assistant to CEO, and Deputy Division Director, Sales Strategy and Marketing Division

Senior Executive Vice President

Masaharu Kamo

Information Systems and Home CVS Business, Division Director, Entertainment & Consumer Service Business Division, Division
Director, BPR & Information Systems Division, Deputy Division Director, Corporate Strategy and Planning Division, and President,
Lawson HMV Entertainment, Inc.

Senior Vice President

Yasuhiko Hirokane

Division Director, Store Operations Division, and Division Director, Management Owner Promotion Division

Senior Vice President

Kazuya Nobe

Division Director, Home CVS Business Division

Executive Vice President

Yutaka Yoshitake

CFO

Senior Vice President

Tatsushi Sato

Deputy Division Director, BPR and Information Systems Division

Executive Vice President

Katsuyuki Imada

Division Director, Corporate Strategy and Planning Division

Senior Vice President

Hajime Kawamura

Deputy Division Director, Franchisee Business Support Division

Executive Vice President

Jun Miyazaki

Division Director, Corporate Communications Division, and Deputy Division Director, Human Resources Division

Senior Vice President

Motonobu Miyake

Senior Vice President

Norikazu Nishiguchi

Division Director, Healthcare Business Division, and Deputy Division Director, BPR & Information Systems Division

Deputy Division Director, International Business Division, and Chief Representative and General Manager, Lawson (China)
Holdings, Inc.

Senior Vice President

Yuichi Wada

Division Director, Merchandising Division

Senior Vice President

Atsushi Maeda

Deputy Division Director, Merchandising Division

Senior Vice President

Tetsu Yamada

Division Director of International Business Division

Senior Vice President

Akihito Watanabe

Deputy Division Director, Entertainment and Consumer Service Business Division, and President, United Cinemas Co., Ltd.

Senior Vice President

Shuichi Imagawa

Division Director, Sales Strategy and Marketing Division

Senior Vice President

Yasuhiro Iseki

Deputy Division Director of Corporate Sales and Store Development Division

Senior Vice President

Takaki Mizuno

Executive Assistant to CEO (responsible for Western Japan)

Senior Vice President

Taiki Hasegawa

Deputy Division Director, Entertainment and Consumer Service Business Division, and Deputy Division Director, Sales Strategy andMarketing Division

Senior Vice President

Shigeaki Kawahara

Division Director, Lawson Store 100 Business Division, Division Director, SEIJO ISHII Business Division, and President, Lawson
Mart, Inc.

Senior Vice President

Akira Ushijima

COO of Lawson (China) Holdings, Inc., and Chief Representative and General Manager, Beijing Lawson, Inc.

Corporate Data

Lawson Group Overview

As of February 28, 2015/Consolidated

Number of employees 7,606
Franchise chain development of LAWSON,
Business activities
NATURAL LAWSON and LAWSON STORE100
Net sales for all stores ¥1,961.9 billion
Number of stores
12,383 (stores in Japan)
All 47 prefectures in Japan, China (Shanghai,
Operating areas
Chongqing, Dalian, Beijing), Indonesia, Hawaii,
ThailandLawson, Inc.
East Tower, Gate City Ohsaki,
11-2, Osaki 1-chome, Shinagawa-ku,
Tokyo 141-8643, Japan

Company name
Headquarters

President and CEO,
Genichi Tamatsuka
Representative Director
Established
April 15, 1975
Capital¥58,506.644 million

Note: Net sales for all stores is the sum of total sales by the domestic convenience store business, overseas business and Seijo Ishii stores (consolidated subsidiaries only). For the Seijo Ishii
business, only the total for its company-operated stores is included.
The total number of stores in Japan is the total of LAWSON, NATURAL LAWSON and LAWSON MART/ LAWSON STORE100 stores operated by Lawson, Inc., and LAWSON storesoperated by Lawson Okinawa, Inc. and Lawson Minami-Kyushu, Inc., and Seijo Ishii stores operated directly by SEIJO ISHII, CO., LTD.

Share information
Authorized shares
Shares issued
Shareholders
Stock exchange
listings

409,300,000
100,300,000
30,618Major shareholders (Top 10)

Tokyo Stock Exchange (1st Section)

1 Mitsubishi Corporation

Financial
institutions

17.44%

Securities companies

4.95%

Individuals, others 7.92%

Other domestic entities

36.31%

Foreign entities

33.38%

Category

Domestic convenience store business

32,08932.1

The Master Trust Bank of Japan, Ltd.
(Trust account)

2,691

2.7

3

Japan Trustee Services Bank, Ltd.
(Trust account)

2,635

2.6

4 NTT DOCOMO, INC.

2,092

2.1

5 Nomura Securities Co., Ltd.

1,867

1.9

6 JP MORGAN CHASE BANK 380055

1,474

1.5

MELLON BANK, N.A. AS AGENT
7 FOR ITS CLIENT MELLONOMNIBUS US PENSION

1,381

1.4

8

BBH FOR MATTHEWS ASIANGROWTH AND INCOME FUND

1,275

1.3

9

National Mutual Insurance Federationof Agricultural Cooperatives

1,259

1.3

1,056

1.1

Mitsubishi UFJ Morgan Stanley
10
Securities Co., Ltd.

As of February 28, 2015/Consolidated

Name of company

Lawson, Inc.
Lawson Mart, Inc.
SCI, Inc
Lawson Okinawa, Inc.
Lawson Minami-Kyushu, Inc.

Dalian 30 stores

Beijing Lawson, Inc.

12,383 stores

Dalian Lawson, Inc.

Overseas stores

590 stores

Chongqing 104 stores
Chongqing Lawson, Inc.

Shanghai 354 stores

Thailand 32 stores

Shanghai Hualian Lawson, Inc.

Phillippines(First store opened March 2015)
PG Lawson Company, Inc.

Hawaii 3 stores
Lawson USA Hawaii, Inc.

Indonesia 48 stores
PT MIDI UTAMA INDONESIA Tbk* The total number of stores and stores in Japan includes stores operated
under Lawson Mart, Inc., Lawson Okinawa, Inc., Lawson MinamiKyushu, Inc., and SEIJO ISHII, CO., LTD. For SEIJO ISHII, CO., LTD.,
only its company-operated Seijo Ishii stores are included.

49

Main businesses and services
A nearby “neighborhood store” that seeks torealize its Corporate Philosophy of “Creating
Happiness and Harmony in Our Communities” byconducting business as a manufacturing retailer
based on a small commercial area model*

As of February 28, 2015

A nearby store, observing a “daily
and reliably” concept, that supports
customer lifestyles embracing“beauty, health, and comfort”

Operating companies

Operating company

Lawson, Inc.
Lawson Okinawa, Inc.
Lawson Minami-Kyushu, Inc.

Lawson, Inc.

A food-lifestyle supermarket forpeople who care about food,providing food from around theworld at affordable prices

Sales of music and film productions
such as CDs/DVDs, related goods
and books, both online and througha nationwide network of 53 stores

A store that contributes to savings
and an easy, convenient daily life
by selling a range of products suchas perishable foods, prepared foods
and daily necessities at a uniform
price of 100 yen (108 yen, including
tax)
Operating company

Lawson Mart, Inc.
Sales of the full range ofentertainment tickets, including
tickets to concerts, sports events,
plays and movies

Operating company

Operating company

Operating company

SEIJO ISHII CO., LTD.

Lawson HMV Entertainment, Inc.

Lawson HMV Entertainment, Inc.

One of Japan’s largest online
bookstores selling books, magazinesand comics

A business that provides installation,
management and operation ofATMs installed at LAWSON stores incooperation with banks

Operation of multiplex movie
theaters offering not only film
entertainment but also such
enriching experiences as 4DX®
(experiential viewing) and various
contents other than movies

Consolidated subsidiary
Consolidated subsidiary
Equity-method affiliate
Equity-method affiliate

Entertainment- and home
convenience-related business

Lawson HMV Entertainment, Inc.
United Cinemas Co., Ltd.

Consolidated subsidiary

Financial services business

Lawson ATM Networks, Inc.

Consolidated subsidiary

Consulting business

BestPractice, Inc.

Consolidated subsidiary

Overseas business

Lawson (China) Holdings, Inc.
Shanghai Hualian Lawson, Inc.
Chongqing Lawson, Inc.
Dalian Lawson, Inc.
Lawson Asia Pacific Holdings Pte. Ltd.
Saha Lawson Co., Ltd.

Consolidated subsidiary

SEIJO ISHII CO., LTD.

Beijing 19 stores

Stores in Japan

Number of Percentages
shares held of total shares(Thousands)
held*

2

Main Lawson Group companies

SEIJO ISHII business

12,973 stores

Saha Lawson Co., Ltd.

Shareholder nameDistribution of shareholders by type

As of February 28, 2015

Total number of stores (worldwide)

As of February 28, 2015/Non-consolidated

Mitsubishi UFJ Trust and Banking
Corporation
Stock transfer agent
4-5, Marunouchi 1-chome,
Chiyoda-ku, Tokyo 100-8212, Japan

48

Store network expansion area

(Consolidated subsidiary of Lawson HMV Entertainment, Inc.)(Consolidated subsidiary of Lawson (China) Holdings, Inc.)(Consolidated subsidiary of Lawson (China) Holdings, Inc.)(Consolidated subsidiary of Lawson (China) Holdings, Inc.)
Consolidated subsidiary(Consolidated subsidiary of Lawson Asia Pacific Holdings Pte. Ltd.)
Consolidated subsidiary

Operating company

Operating company

Lawson HMV Entertainment, Inc.

Lawson ATM Networks, Inc.

Operating company

United Cinemas Co., Ltd.
A home-delivery service providing
healthful and delicious food. An allround home delivery site on whichcustomers can purchase not only
Lawson Fresh products but also food,daily necessities and other items
handled by the Lawson Group.
Operating company

Lawson, Inc.
Twenty-two farms* nationwide
producing fresh fruit and vegetables
for Lawson Group stores

Operating company

Individual LAWSON farms

A business that sells safe, delicious
foodstuffs as ingredients for homecooking, such as organic vegetables
and natural foods, as well as otheritems for the home through direct
home delivery or shops

One of Japan’s largest individual
home-delivery services for organicand inexpensive agrochemicalfarm produce and other daily-life
products

Operating company

Radishbo-ya Co., Ltd.

DAICHI wo MAMORU KAI Co., Ltd.
Delivery of products handled by the Lawson
Group and home-delivery items handled by
Sagawa Express Co., Ltd. and other services
related to shopping and housing/living with
Lawson stores as the starting point. (Services
initiated in June 2015).
Operating company

SG Lawson Co., Ltd.

Operating company

Eleven-Year Financial Summary(Millions of yen)

2014

(Fiscal year)

2013(Thousands of
U.S. dollars 1)(Millions of yen)

2012

2011

2010

2009

2008

2007

2006

2005

2004

2014

For the year:
Gross operating revenues
Franchise commissions from franchise stores¥

Net sales
Other

Total operating revenues¥

247,681
174,044
76,188497,913242,079
168,159
75,010485,248
68,12737,966
81,503(47,924)(39,650)
84,03247,88970,482
32,687
110,568(100,434)(3,289)141,251
41,826

Operating profit
Net profit
Net cash provided by operating activities
Net cash used in investing activities
Net cash used in financing activities
Capital expenditures 2
Depreciation and amortization 3¥

230,003
192,942
64,500487,445¥

215,574
208,063
55,320478,957

66,24633,18385,189(54,196)(31,980)
77,36143,886¥

61,76924,88586,357(52,912)(27,545)
74,572
37,846

197,673
192,330
51,275441,278¥

185,656
233,694
47,842
467,192

55,541
25,387
72,210(30,522)(28,799)
50,32633,084¥50,276
12,562
40,696(42,596)(27,239)
71,39927,468

186,928
119,944
42,604349,476¥

49,18623,80751,717(15,647)(14,911)42,907
20,879177,443
84,266
39,468301,177¥

174,32575,85832,870283,053

46,61022,11955,771(36,525)(31,973)
64,413
21,469¥44,513
20,98347,596(31,754)(736)
49,822
21,352

170,785
66,64630,627
268,058¥

162,963
64,522
26,910254,395

43,86722,02546,933(55,282)(7,795)54,417
20,896$42,941
20,43547,329(33,297)(13,836)
46,873
19,6412,076,641
1,459,244
638,786
4,174,671
590,945
274,059
927,039(842,073)(27,575)
1,184,296
350,683

At year-end:¥

Total assets
Net assets
Shareholders’ equity ratio
Cash and cash equivalents
Total number of stores in Japan
Number of employees (full-time)

764,614
263,798
33.5%
76,755
12,276
7,606

¥

327
240
73.4%

¥

620,993
250,498
39.5%
68,76011,606
6,336

¥

380
220
57.9%

¥

579,810230,182
39.1%
72,766
11,130
6,404

¥

332
200
60.2%

¥

531,454214,663
39.7%
73,67010,457
6,475

¥

249
180
72.2%

¥

476,037
208,467
42.7%
67,712
9,994
5,703

¥

255
170
66.8%

¥

448,132
198,13642.8%
54,843
9,761
5,236

¥

127
160
126.3%¥

436,096
201,16744.8%
83,982
9,527
5,186

¥

240
160
66.6%

¥

397,108
188,574
46.6%
62,823
8,587
3,735

¥

215
110
51.2%

¥

398,258
199,49349.0%
75,547
8,564
3,614

¥

202
100
49.6%

¥

375,107
175,18446.7%
60,441
8,366
3,585

¥

216
90
41.8%

¥

356,310160,282
45.0%
76,585
8,077
3,391

$

198
70
35.3%

$

6,410,782
2,211,772
634,540

Per share data:
Net profit (yen/ U.S. dollars 1)¥

Cash dividends (yen/ U.S. dollars 1)
Payout ratio

2.74
2.01

Financial data:
16.1%
6.3%

13.0%
4.7%

Return on equity (ROE)
Return on assets (ROA)

15.2%
6.0%

12.0%
4.9%

12.8%
5.5%

6.5%
2.8%

12.5%
5.7%

11.6%
5.6%

11.3%
5.4%

13.1%
6.0%

13.0%
5.7%

Net sales of all stores(Domestic convenience store business ):Net sales by store format
Franchise stores 4¥

Company-operated stores¥

1,827,779
105,019

1,810,418
126,873¥

1,747,915
156,339¥

1,651,433
173,820¥

1,499,576
183,205¥

1,433,678
232,459¥

1,434,166
124,614¥1,331,785
83,321¥

1,311,479
75,151¥

1,295,704
66,027¥1,265,257
63,802$ 15,324,717
880,515665,687
297,369
148,134
217,887
1,329,077
3.2%

8,672,382
3,598,659
2,324,222
1,609,961$ 16,205,232

Net sales by product category 4
Processed foods
Fast foods
Daily delivered foods
Non-food products

Net sales of all stores¥

Ratio of operating profit to net sales of all stores

1,034,355
429,212277,210
192,020
1,932,798
3.6%¥

1,060,455
408,672
275,437
192,726
1,937,292
3.5%¥

1,063,120
372,706
271,920
196,506
1,904,254
3.5%

1,022,378
345,226
263,101
194,546
1,825,253
3.4%

¥

¥

897,415
321,851
264,166
199,348
1,682,782
3.3%

902,306
324,197
239,088
200,544
1,666,136
3.0%

¥

¥

844,324
332,894
186,109
195,453
1,558,781
3.2%¥

726,750
327,501
162,625
198,230
1,415,106
3.3%

705,155
324,993
155,575
200,907
1,386,630
3.2%

¥

¥

682,006
312,289
150,917
216,519
1,361,731
3.2%¥

Notes: 1. The U.S. dollar amounts represent Japanese yen exchange rate against the US dollar as of February 28, 2015 ($1 = ¥119.27).
2. Effective from the annual report 2006, the composition of capital expenditures has changed to include leases, investments and advances, and construction assistance guarantees.
3. These figures include depreciation and amortization of intangible assets.
4. These figures include sales reported by franchise stores and are unaudited.

Net sales of all stores(Domestic convenience store business)(Hundred millions of yen)
20,00019,042

Operating profit

Net profit

Total assets(Hundred millions of yen)
800

(Hundred millions of yen)
400

(Hundred millions of yen)
3,000

19,372 19,327

662

681

379

704

600

18,000

2,504

326

331

617

18,252Return on equity (ROE)
Return on assets (ROA)
2,637

ROE

(%)
20.0

2,301
300

555

2,084
253

16,827
16,00015.2

Annual dividends per share (left axis)
Payout ratio (right axis)

(yen)
300

66.8

12.8

13.0

12.0

180

170

72.2

220

1,000

180

60

60.2
57.9

100

200

50

6.3

4.7

4.9

2010

2011

2012

2013

2014

(Fiscal year)

Lawson, Inc. Integrated Report 2015

0

2010

2011

2012

2013

2014

(Fiscal year)

0

120

40

60

20

5.0

2,000

0

6.0

5.5

80

73.4

200

10.0
14,000

(%)
100

240

240

15.0

200

400

ROA

16.1

2,146

2,000

248

Payout ratio and dividends

2010

2011

2012

2013

2014
(Fiscal year)

0

2010

2011

2012

2013

2014

(Fiscal year)

0.0

2010

2011

2012

2013

2014

(Fiscal year)

0

2010

2011

2012

2013

2014

0

(Fiscal year)

Lawson, Inc. Integrated Report 201551

Financial Section

Managements’ Discussion and Analysis
Industry Trends

Management policies for fiscal 2014

The Japanese economy enjoyed a gradual recovery in fiscal
2014 thanks to economic measures by the government
and improved corporate performance due to the weakeryen. Meanwhile, the retail industry continued to facedifficult situations, including the temporary drop in personal
consumption after the consumption tax hike, bad weather
during the summer and intensifying competition.
Against this backdrop, the convenience store industry
performed well throughout the calendar year 2014 (January to
December) by aggressively opening new stores: The industrywide sales reached 10,423.2 billion yen, up 5.6% from theprevious fiscal year.
The top four industry players account for 85% of themarket share, with the total number of stores reaching
51,814, up 5.0% from the previous fiscal year as of theend of December. However, the net sales of existing stores
declined by 0.8% from the previous fiscal year: While they had
exceeded the previous fiscal year until March thanks to thelast-minute demand before the consumption tax hike, they had
fallen since April because of the rebound from that last-minutedemand, bad weather and stagnant consumption.

Retail industry market size and convenience store share 1(Billions of yen)

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004 2

Total retail industry annual sales

141,219

138,897

137,585

135,157

136,479

132,961

136,019

135,417

134,911

134,828

133,649

Convenience store sector
annual sales

10,423

9,872

9,477

8,775

8,114

7,981

7,943

7,490

7,399

7,360

7,289

Convenience store share

7.3%

7.1%

6.9%

6.5%

5.9%

6.0%

5.8%

5.5%

5.5%

5.5%

5.5%

Source: “Current Survey of Commerce,” Ministry of Economy, Trade and Industry
Notes: 1. Annual sales amounts of the retail industry and the convenience store sector are on a calendar-year basis.
2. The figures above reflect the revision of the figures in 2004 and onwards that the Ministry of Economy, Trade and Industry compiled in March, 2013.

The net sales of all stores among the top four chains in the convenience store industry 1(Billions of yen)

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

Lawson

1,961

1,945

1,907

1,826

1,683

1,666

1,559

1,415

1,387

1,362

1,329

Seven-Eleven Japan

4,008

3,781

3,508

3,281

2,948

2,785

2,763

2,574

2,534

2,499

2,441

FamilyMart

1,860

1,722

1,585

1,535

1,440

1,274

1,246

1,122

1,069

1,032

998

988

980

947

980

923

902

940

902

911

920

934

Total of the top 4 chains

8,817

8,428

7,947

7,622

6,994

6,627

6,508

6,013

5,901

5,813

5,702

Total market share of the
top 4 chains

84.6%

85.4%

83.9%

86.9%

86.2%

83.0%

81.9%

80.3%

79.8%

79.0%

78.2%

Circle K Sunkus

Source: Data published by each company
Note: 1.	The figures for the top four chains are on a fiscal-year basis, while the total market share of the top four chains is the proportion in convenience store sector annual sales on acalendar-year basis.

Number of convenience stores

Number of convenience stores(Stores)

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

52,72550,23447,801

43,37342,347

41,72440,74540,40540,18339,60038,621

Source: “2015 JFA Franchise Chain Statistics,” Japan Franchise Association. The number of convenience stores is on a calendar-year basis.

Non-consolidated operating results(Fiscal year)

Net sales of all stores(Millions of yen)2014

As a percentage
of all stores

2013

2012

2011

2010

1,932,798

100.0%

1,758,656

100.0%

1,693,435

100.0%

1,621,328

100.0%

1,502,754

100.0%

Gross operating revenues

316,340

16.4%

298,779

17.0%

282,752

16.7%

272,498

16.8%

263,20917.5%

Gross operating profit

293,93815.2%

275,44215.7%

258,061

15.2%

244,46215.1%

230,156

15.3%

Selling, general and administrative expenses

232,97212.1%

213,99912.2%

198,730

11.7%

188,199

11.6%

179,945

12.0%

Advertising and promotional expenses

8,227

0.4%

9,023

0.5%

10,691

0.6%

11,144

0.7%

9,033

0.6%

Personnel expenses

36,6911.9%

35,8522.0%

34,931

2.1%

35,891

2.2%

35,736

2.4%

Facility expenses

132,941

6.9%

123,444

7.0%

113,3216.7%

104,215

6.4%

100,111

6.7%

Other SG&A expenses

55,1122.9%

45,6802.6%

39,784

2.3%

36,9482.3%

35,137

2.3%

Operating profit

60,966

3.2%

61,443

3.5%

59,331

3.5%

56,263

3.5%

50,210

3.3%

Recurring profit

61,6493.2%

62,171

3.5%

59,4593.5%

56,1103.5%

49,312

3.3%

Net profit

26,2001.4%

33,6251.9%30,314

1.8%

22,462

1.4%

24,643

1.6%

52

Lawson, Inc. Integrated Report 2015

Responding to social changes such as “more women in theworkforce” and “population aging,” we strived to enhance ourmerchandise assortment to meet customers’ needs, including
more meat products (both prepared and fresh foods ) andhealth-oriented products.
Meanwhile, net sales of existing stores declined fromthe previous fiscal year due to a drop in sales of cigarettes,
bad weather during the summer, continuing and intensifying
competition in the industry, and the declining number ofcustomers due to polarized consumption in the wake of thetax hike in April. Nevertheless, the gross profit margin was
up 0.3% from the previous fiscal year through such efforts asdevelopment of products with additional value and high profit

margins, which originated in the procurement of raw materials,
as well as sales expansion of over-the-counter fast foods withhigh profit margins.
As for new stores, the Group as a whole opened 1,010
stores (the net increase: 588 stores) while maintaining thebalance between quality and quantity.
Regarding polarized consumption due to such factors as
the tax hike, SEIJO ISHII CO., LTD., which the Group acquired
through share transfer this fiscal year, and NATURAL LAWSON
responded to quality-focused needs. LAWSON STORE100
developed products at 100 yen with more value. While regular
LAWSONs play a core role, these stores are also responding
to customers’ needs in a detailed manner.

Overview of merchandise and services
Regarding merchandise and services, we promoted a variety
of initiatives to improve customer satisfaction. One example
is the revision of sizes and prices in the MACHI Café menu.
In response to high demand from customers, we newly
introduced blended coffee and iced coffee in S size at 100 yen,including tax, while expanding menu options by adding cafélatte and other items. As a result, MACHI Café achieved robust
sales. We also strengthened our merchandise assortment of
prepared foods and daily delivered foods to attract female andsenior customers who usually shop at supermarkets.
• Regarding ready-made meals, high-priced items such as
Niigata-produced koshihikari rice balls stuffed with fatty pork,
beef harami (skirt steak) and nakaochi kalbi (between-theribs) recorded strong sales. Chilled gyudon (beef bowl) boxedlunches launched in November 2014 were also popular. In
addition, we strived to boost sales in the sandwich category
by offering high-value-added fruit sandwiches (Mont Blanc
chestnuts, shine Muscat grapes, etc.) on an ongoing basis.
• A s for over-the-counter fast foods, “Ohgon Chicken
Umashio,” a tender and juicy fried chicken product flavoredwith a golden crispy breading, rock salt and black pepper,
was well received. Moreover, as “Community Health Hubs,”
we also placed emphasis on selling health-oriented products.
For example, we offered the “Bran Bread” series 1 on an
ongoing basis for customers who watch their blood sugar
levels. In some areas, we also promoted “Fiber enrichedsoba (buckwheat noodles),” which was approved as Foodfor Specified Health Uses (FOSHU, or “Tokuho” in Japanese),and “Pre-cut vegetables” made with vegetables produced
based on the “Nakashima-method.” 2 There are currently 22
Lawson Farms in which Lawson, Inc. holds equity stakes.
The farms continue to play the role of a stable supplier ofvegetables and fruits for our Group stores and factories
producing Lawson’s original products. Through these
initiatives, we will further boost Lawson’s corporate brandimage as a “Health-promoting Company.”
In addition to the enhancement of these products, we arealso expanding a merchandise assortment of “Gift cards,” 3and they continue to be well received.
• R egarding sales promotion activities, we implemented apoint-reward campaign targeting Ponta Card members toencourage purchasing with the aim of increasing the rate of
repeat visits. Total Ponta Card members reached over 68
million as of the end of February 2015, including members
who joined through other participating companies, and theyaccount for about 48% of the total sales.
Notes: 1.	Bran: The external layers of wheat and rice, rich in nutrients such as dietaryfiber, iron, calcium, magnesium, zinc and copper. The food is noted for its low
level of carbohydrate.
2. Nakajima-method: A leading cultivating method in Japan, supplying appropriate
nutrients to crops according to their growing conditions and the nutritional(mineral) balance of the soil. This method uses techniques for developing
healthy soil based on the diagnosis of soil conditions in conjunction withtechniques to control the growth process of crops to maintain healthy growth.
3. Gift cards: Collective term for prepaid cards that can be used for onlinetransactions.

Lawson, Inc. Integrated Report 201553

Financial Section

Overview of store operations

Number of convenience stores in Japan

In store operations, we continued to promote the Three
Essential Practices ((1) serving customers courteously, (2)providing a quality product offering that meets community
needs, and (3) keeping our stores and communities clean).
Notably, at stores with MACHI café, employees strived to
improve customer satisfaction by offering products andservices in a caring manner through better communication withcustomers. We will continue to further promote a customerfocused merchandise assortment for our communities
through: store-by-store analysis reports based on Ponta Card
members’ purchasing data, arrangement of shelves tailoredto the locational characteristics of each store and sharing ofbest practices at monthly area meetings with franchise store
owners.

Overview of store development
Store development by the GroupIn opening new stores, the Group prioritized profitability basedon its proprietary ROI-focused store development standard.
In December, Lawson, Inc. concluded an absorptiontype company split agreement with SUNNY MART Co., Ltd.,the parent company of Three-F Chu-Shikoku Co., Ltd. Basedon this agreement, we have taken a phased approach totransforming Three-F stores in Shikoku into LAWSON stores.
Lawson Kochi, Inc. was established on April 1, 2015, withSUNNY MART Co., Ltd. and Lawson, Inc. holding 51% and
49% equity stakes, respectively. LAWSON stores in Kochi
Prefecture will be operated by Lawson Kochi, Inc.
Furthermore, the Group has been striving to expand thestores offering non-prescription drugs, and the number of storesreached 104 as of the end of February 2015. Moreover, throughpartnerships with local drug store chains, we continue to expand
healthcare-focused stores offering a merchandise assortmentof around 5,000 items, twice as many as conventional
LAWSON stores, by adding such items as non-prescription
drugs, cosmetics and daily necessities. In total, the numberof Pharmacy Lawson stores equipped with drug-dispensing
pharmacies reached 39 as of the end of February 2015.

LAWSON MART, a store format the Group launched in
February 2014, has endeavored to capture customer needs
as an evolutionary fresh foods convenience store. We havedecided to incorporate the expertise developed by LAWSONMART into LAWSON stores, including the function as analternative to supermarkets and the knowhow on bettersupport for the daily lives of customers in residential areas.
Meanwhile, with regard to LAWSON STORE100, we intend to
expand its merchandise assortment of fresh foods and 100yen products with value in order to better support the daily
lives of customers. The Group as a whole will thus addressincreasingly polarizing customer needs.
As a result, the total number of LAWSON, NATURALLAWSON, and LAWSON STORE100 (including LAWSONMART) stores opened and closed during the fiscal year underreview stood at 979 and 400 stores, respectively, with the total
number of stores in Japan reaching 11,900 as of the end of
February 2015. Furthermore, Lawson Minami-Kyushu, Inc.,an affiliated company accounted for by the equity method,
operates 202 LAWSON chain stores in Kagoshima Prefecture,and Lawson Okinawa, Inc. operates 174 LAWSON chain
stores in Okinawa Prefecture as of the end of February 2015.

Number of stores in the convenience store business in Japan(Stores)

2014

2013

2012

2011

2010

Total number of stores

12,276

11,606

11,13010,457

9,994

Openings

1,010

869

938

766

550

Closings

422

393

265

303

317

Net increase

588

476

673

463

233

(Fiscal year)

Note: Including stores operated by Ninety-nine Plus, Inc., Lawson Mart, Inc., Lawson Okinawa, Inc., Lawson Minami-Kyushu, Inc. and Lawson Kumamoto, Inc.

54

Lawson, Inc. Integrated Report 2015

(Stores)

Net increasein the term 42014 4(Fiscal year)

StoresShare

Stores2013 3
Stores

2012 2
ShareStoresShare

Lawson, Inc.
Company-operated stores
123

1.0%

—

112

1.0%

106

1.0%

32

0.3%

-1

32

0.3%

41

0.4%

Type B

1,286

10.5%

57

1,207

10.4%

1,292

11.6%

Type G

1,988

16.2%

-114

2,081

17.9%

2,236

20.1%

Type C

7,236

58.9%

582

6,630

57.1%

6,008

54.0%

NATURAL LAWSON

84

0.7%

10

73

0.6%

69

0.6%

LAWSON STORE100 1

1,151

9.4%

-51

1,202

10.4%

—

—

Subtotal

11,90096.9%

483

11,337

97.7%

9,752

87.6%

LAWSON
NATURAL LAWSONFranchise stores

Lawson Okinawa, Inc.
2

0.0%

1

1

0.0%

1

0.0%

Franchise stores

172

1.4%

8

162

1.4%

153

1.4%

Subtotal

174

1.4%

9

163

1.4%

154

1.4%

Company-operated stores

Lawson Minami-Kyushu, Inc.
1

0.0%

-2

3

0.0%

—

—

Franchise stores

201

1.6%

122

79

0.7%

—

—

Subtotal

202

1.6%

120

82

0.7%

—

—

12,276100.0%

588

11,606100.0%

11,130100.0%

Company-operated stores

Total number of convenience storesin JapanNotes: 1. LAWSON STORE100 includes “LAWSON STORE100” and “LAWSON MART.”
2. The total number of stores includes stores operated by Ninety-nine Plus, Inc., which was absorbed into the parent company in February 2014.
3. The total number of stores includes stores operated by Lawson Kumamoto, Inc., which was absorbed into the parent company in March 2014.
4.	Reflecting the change in the store counting standard from fiscal 2014, the 2014 data in this table also include small stores (82 stores as of March 1, 2014). Due to the abovechange, these 82 stores are excluded in the net increase (decrease) figure. Moreover, 24 stores operated by Lawson Kumamoto, Inc. were absorbed by Lawson, Inc., and 120
stores operated by Lawson, Inc. in Kagoshima Prefecture were transferred to Lawson Minami-Kyushu, Inc. in March 2014.

Introduction of a new FC contract package
Beginning in March 2012, we revisited the Group’s system of
FC contracts, which was first put into practice in December
1998, and introduced a new FC-Cn contract system. In
addition to reviewing the charge rate scheme, we also agreed
to bear part of the disposal loss and utility bills that had beenborne by FC owners. The decision to make these changes
was aimed at motivating owners to more actively engage inefforts that would help expand the customer base by selling
more fresh foods and over-the-counter fast foods, thereby
accelerating revenue growth. Major changes from conventional
FC-C and FC-G contracts include: (1) the payment of a portionof expenses related to waste disposal by the headquarters
with the aim of thoroughly reducing opportunity loss by

assisting FC stores in placing orders; (2) the payment of 50%
of utility costs by headquarters, which had previously beenborne entirely by FC owners (in anticipation of the increasing
utility costs due to the introduction of new fixtures in promoting
sales of fresh foods, over-the-counter fast foods and preparedfood); and (3) changes in charge rates, presented on the next
page, reflecting the enhanced role played by the headquartersin promoting and strengthening sales.
While this revised system had been mainly introduced
to new contracts, we have also fully extended this system torenewed contracts since fiscal 2013. Moreover, starting in fiscal
2015, we will also promote transfers to the FC-Cn contracts
even during the contract period.

Lawson, Inc. Integrated Report 201555

Financial Section

Overview of performance figures

Types of Lawson contracts(Previous contracts)
Contract typeC

G

Contract termB

10 years from store opening day

Requirements for FC owners

At least 20 years old, 2 full-time store workers

Land and buildings

Provided by headquarters

Prepared by a franchise store

Investment in store construction and interior
decoration expenses

Borne by headquarters

Borne by a franchise store

Signs and business fixtures

Provided by headquarters

Payment by a franchise store
at time of contract 1

Franchise fee¥1.5 million (Contract fee, training expenses, and store opening preparation commission, each ¥500,000) (excluding tax)

Investment¥1.5 million (Including payment for some merchandise purchased on behalf of the store)

Guarantee deposit provided by a franchise store
Headquarters income 2

Not required

Average monthly sales x 2 months

Not required

Gross profit x 50%

Gross profit x 45%

Gross profit x 34%

Burden of utility expenses

A franchise store

Minimum guarantee (annual) 2 (thousands of yen)

21,00022,20022,200

Sales figures

Sales of existing stores (consolidated basis)
Sales of existing stores on a consolidated basis for the
fiscal year under review declined by 1.4% compared withthe previous fiscal year. In the first half of the fiscal year, thenumber of customers remained low particularly due to bad
weather during the summer and polarized consumption after
the consumption tax hike. The number of customers went up
in the second half of the fiscal year through enhancement of
TV commercials and strategic price changes. Nevertheless, net
sales of existing stores (consolidated basis) remained at 98.6%
from the previous fiscal year, and the total sales of existing
LAWSON and NATURAL LAWSON stores remained at 99.0%
from the previous fiscal year.

Net sales of all stores (consolidated basis)
In fiscal 2014, net sales of all LAWSON stores (consolidated)amounted to 1,961,900 million yen (up 0.9% from the previous
fiscal year). Although there were negative effects, including
a drop in sales of cigarettes and the downturn in sales
attributable to bad weather, the net sales increased from theprevious fiscal year, as the number of domestic convenience
stores increased to 12,383 (including the stores of all Group
companies and those of Seijo Ishii business), which is a 777
increase from the previous fiscal year.

(New contracts)
Contract typeCn

Contract term

B4
10 years from store opening day

Requirements for FC owners

At least 20 years old, 2 full-time store workers

Land and buildings

Provided by headquarters

Prepared by a franchise store

Investment in store construction and interior
decoration expenses

Borne by headquarters

Borne by a franchise store

Signs and business fixtures

Partial guarantee for expenses associated withproduct disposal losses

Headquarters income2

Burden of utility expenses¥1.5 million (Contract fee, training expenses, and store opening preparation commission, each ¥500,000) (excluding tax)
¥1.5 million (Including payment for some merchandise purchased on behalf of the store)
Headquarters will bear the following percentage of clearance anddisposal costs according to their proportion in merchandise sales:• Greater than 2.0% up to 3.0%: 20%• Greater than 3.0% up to 4.0%: 30%• Greater than 4.0%: 55%
The following percentage of gross profit:• ¥3.0 million or less: 45%• Greater than ¥3.0 million up to ¥4.5 million: 70%• Greater than ¥4.5 million: 60%
50% 3 of electricity expenses and store air conditioning energy expenses
are borne by headquarters

2

Minimum guarantee (annual) (thousands of yen)

18,600—Gross profit x 34%

LAWSON STORE100 contracts

Contract stores
Contract term
Necessary expenses

Investment

VL-B

A franchise store uses its own land
Provided by headquarters
and building
Land and building owned by aStores already being operated by the company as LAWSON STORE100
franchise store

Land and buildings

10 years from the opening day

10 years from the opening day

Payment by afranchise store attime of contract 4¥2.55 million (consumption tax included)
Breakdown Franchise fee ¥1.05 million (consumption tax included)
Contract fee ¥262,500/Training expenses ¥262,500/Store opening preparation commission ¥525,000
Investment¥1.5 million (including payment for some merchandise purchased on behalf of the store)

Other expenses

Store opening preparation expenses: Approx. ¥500,000 (e.g., change, licensing fee for operation)

Store construction andinterior decoration

Borne by headquarters

Business fixtures

Borne by a franchise store

Provided by headquarters

Minimum guarantee 5¥20.4 million per year

Headquarters income 5[Sliding scale] The following percentage of gross profit (monthly):¥1–¥3,000,000: Gross profit x 27%¥3,000,001–¥3,500,000: Gross profit x 68%¥3,500,001–¥4,500,000: Gross profit x 62%¥4,500,001 or greater: Gross profit x 48%

Support to franchise stores (Operating
expenses of a franchise store partially borne byheadquarters)

Headquarters will bear the following percentage of clearance and disposal
costs according to their proportion in monthly merchandise sales:• Greater than 1.5% up to 2.0%: 30%• Greater than 2.0%: 60%
Headquarters will pay up to ¥100,000 a month.

100.1

100
95

97.1

98.6

90

1Q

2Q

3Q

4Q

1Q

2Q

2009

3Q

4Q

1Q

2010

Net sales of existing stores

2Q

3Q

4Q

2011

Average number of customers

1Q

2Q

3Q

4Q

2012

1Q

2Q

3Q

4Q

2013

1Q

2Q

3Q

4Q

2014

Average spending per customer

A franchise store
22,200

VL-J

105

0

Notes: 1.	The amount is paid by the franchise store to headquarters at the time of the franchising contract. In addition, the franchise store needs to separately provide a total of about¥500,000, including the cash register float, at the time of store opening.
2. The headquarters income and minimum guarantee apply to stores operating on a 24-hour basis.
3. The ceiling on the monthly amount borne by headquarters is ¥250,000.

Contract type

110

98.8

Provided by headquarters

Payment by a franchise store at Franchise feetime of contract 1
Investment

YoY changes in net sales of existing stores, average number of customers and average spending per customer (Consolidated)(%)¥22.2 million per year

Gross profit x 27%

Growth rate of net sales of existing stores, average number of customers, and average spending per customer (Non-consolidated) *(Fiscal year)

Net sales of existing stores (YoY)

2014

2013

2012

2011

2010

99.0%

99.8%

100.0%

105.4%

100.8%

Average number of customers

98.0%

99.0%

99.4%

101.0%

100.4%

Average spending per customer

101.0%

100.8%

100.6%

104.3%

100.4%* The total of LAWSON and NATURAL LAWSON.

Net sales by product category (all stores, consolidated
basis)
Regarding consolidated results by product category, sales offast foods increased by 5.2% from the previous fiscal year.
Sales of daily delivered foods also contributed to the Group’s
overall performance, improving by 3.5% from the previous
fiscal year.
As for the fast food category, sales of the over-thecounter fast foods improved from the previous fiscal year,
thanks mainly to the increase in sales of MACHI Café products,
whose sizes and volumes were revised in the second halfof the fiscal year, and the strong sales of the new product“Ohgon Chicken Umashio.” Sales of other sub-categories also

improved from the previous fiscal year. For example, highpriced products, such as fruit sandwiches, sold well. Sales ofdelicatessen items also improved through coupons to promotesales in the evening and renewal of the salad menu.
Sales of ice cream, under the daily delivered foodcategory, also increased substantially thanks to the strong
sales of UCHI café frappe, which customers warm up and eat.
Sales of processed foods declined from the previous
fiscal year due to a significant drop in cigarette and drink sales.
As for the non-food category, sales of books andmagazines continued to decline due to the slump across theindustry.

—

Notes: 4.	The amount is paid by the franchise store to headquarters at the time of the franchising contract. In addition, the franchise store needs to separately provide a total of about¥500,000, including the cash register float, at the time of store opening.
5. The headquarters income and minimum guarantee apply to stores operating on a 24-hour basis.

56

Lawson, Inc. Integrated Report 2015

Lawson, Inc. Integrated Report 201557

Financial Section

Sales by product category (Consolidated, total net sales in Japan)(Fiscal year)

2014(Millions of yen)

2013

2012

2011

2010

Fast foods (share)

429,21222.2%

408,67221.1%

373,38519.6%

345,42418.9%

321,866

19.1%

Daily delivered foods (share)

277,21014.4%

275,437

14.2%

272,31214.3%

263,180

14.4%

264,169

15.7%

Processed foods (share)

1,034,355

53.5%

1,060,455

54.7%

1,064,133

55.8%

1,022,619

56.0%

897,427

53.3%(Cigarettes) (share)

482,75025.0%

459,100

23.7%

496,97126.1%

470,666

25.8%

382,167

22.7%

Total food sales (share)

1,740,778

90.1%

1,744,564

90.1%

1,709,830

89.7%

1,631,223

89.3%

1,483,462

88.2%

Non-food products (share)

192,0209.9%

192,7269.9%

196,716

10.3%

194,587

10.7%

199,350

11.9%

Net sales of all stores (share)

1,932,798

100.0%

1,937,292

100.0%

1,906,547

100.0%

1,825,810

100.0%

1,682,812

100.0%

Product categories
Category

Products included

Fast foods

Rice dishes, noodles, sandwiches, delicatessen items, over-the-counter fast foods, etc.

Daily delivered foods

Bakery items, desserts, ice cream, fresh foods, etc.

Processed foods

Soft drinks, alcoholic beverages, cigarettes, processed foods, confectionery, etc.

Non-food products

Daily necessities, books, magazines, etc.

Gross profit margin by product category (non-consolidated
basis) 1
The gross profit margin was 31.3%, up 0.3% from the previous
fiscal year.
There are several reasons for this growth. For example,
sales of fast foods with the higher profit margin accounted

for 23.5%, up 1.1% from the previous fiscal year, while theproportion of processed food sales, including cigarettes withthe lower profit margin, was 53.6%, down 1.3%. The profit
margin of non-food products, such as tickets and gift cards
that have been selling well, also went up by 1.2% to 48.9%.

2014

2013

2012

2011

2010

38.9%

38.9%

38.4%

38.2%

37.8%

Daily delivered foods

34.1%

34.1%

34.4%

34.5%

34.6%

Processed foods(Fiscal year)

24.1%

24.0%

23.9%

23.8%

24.5%

Non-food products 3

48.9%

47.7%

45.6%

43.4%

42.2%

Gross profit margin

31.3%

31.0%

30.5%

30.1%

30.6%

2

Notes: 1. The total of LAWSON and NATURAL LAWSON.
2. Processed foods include cigarettes.
3. Commission revenues from third party bill settlement services are included when the gross profit margin of non-food products was calculated.

Third party bill settlement services (Non-consolidated) 1
2014

2013

2012

2011

2010

2,073,049

1,979,383

1,879,679

1,725,788

1,639,203

Number of transactions (millions)

198.9

196.1

190.4

177.7

169.8

Commission revenues (millions of yen)

10,778

10,584

10,191

9,487

9,027

(Fiscal year)

Bill settlements (millions of yen)58

Lawson, Inc. Integrated Report 2015

in Shizuoka Prefecture, which enables customers to pick up items
ordered online from Amazon at LAWSON stores. We will strive toenhance customer convenience by additionally partnering with othercompanies to establish an “Open Platform” based on the networks of
LAWSON stores that offer a range of services encompassing ordering,collection, and home delivery.
Lawson ATM Networks, Inc., which operates the Financial
Services-related Business, continued contributing to consolidated
results owing to an increase in the number of ATMs installed. In thisfiscal year, we strengthened partnerships with new financial institutions,bringing the total number of our financial institution partners to 71
nationwide (up 6 from the end of the last fiscal year), including online
banks, and the number of ATMs installed nationwide to 10,767 (up649 from the end of the last fiscal year) as of the end of February
2015.
Regarding Seijo Ishii Business, it is operated by SEIJO ISHII
CO., LTD., of which Lawson, Inc. acquired all shares in October 2014.
Seijo Ishii is a chain of small supermarkets that strives to develop andmanufacture high-value-added products. The company-operated
stores of Seijo Ishii totaled 107 as of the end of February 2015. Byleveraging the business infrastructure of the Lawson Group, we aim tofurther reinforce Seijo Ishii’s strengths and enhance its corporate value.
Meanwhile, we will also strive to strengthen our Domestic Convenience
Store Business by absorbing Seijo Ishii’s knowhow as a manufacturingretailer, including its central kitchen.

Items of Consolidated Statement of Income

Gross profit margin by product category (Non-consolidated) 1

Fast foods

Other businesses
In addition to the Domestic Convenience Store Business, the Groupis also involved in other businesses, including: Overseas Business,
Entertainment and Home Convenience Business, Financial Servicesrelated Business and Seijo Ishii Business.
With regard to Overseas Business, the Group operates
LAWSON stores in Shanghai, Chongqing, Dalian, and Beijing in the
People’s Republic of China. In Thailand, Saha Lawson Co., Ltd., a joint
venture with such companies as the SAHA Group, a leading distributorof consumer goods in Thailand, operates stores under the store
brand of LAWSON 108 and 108SHOP. In Hawaii in the United States,
Lawson USA Hawaii, Inc. operates LAWSON stores. In Indonesia, PT
MIDI UTAMA INDONESIA Tbk also operates LAWSON stores.
With regard to the Entertainment and Home Convenience
Business, Lawson HMV Entertainment, which forms the core of theentertainment-related business, posted a solid performance led by anincrease in ticket sales and continued to secure the top position in theticketing industry. The number of HMV stores that sell music CDs andDVDs totaled 53 as of the end of February 2015. Furthermore, United
Cinemas Co., Ltd., which became a consolidated subsidiary in August
2014, operates a total of 331 screens at its cinemas nationwide. We
will strive to offer an even wider selection of products and services
to better respond to customer needs, for example, by expanding
our ticketing business. Moreover, we entered into a partnership with
Amazon Japan K.K. in November 2014 and launched a new service

Gross Operating Revenues
For the year ended February 28, 2015, gross operating revenues
consisting of net sales, franchise commissions from franchise storesand “Other” stood at 497.9 billion yen, an increase of 12.6 billion
yen, or 2.6%, compared to a year-ago period, and 10.9 billion yen
above the plan. This was attributable to the fact that, while thenumber of franchise stores grew during the year, revenues of United
Cinema Co., Ltd. and SEIJO ISHII CO., LTD. were included in the
consolidated statement of income of Lawson, Inc. as a result of its
previous purchase of all shares in these two companies. Net sales
totalled 174.0 billion yen, franchise commissions from franchise
stores 247.6 billion yen and “Other” 76.1 billion yen.
Selling, General, and Administrative Expenses
For the year under review, consolidated selling, general, andadministrative expenses stood at 299.3 billion yen, an increase of
8.8 billion yen compared to a year-ago period, and approx. 4.9 billion
yen above the plan. This was attributable to the fact that selling,
general, and administrative expenses of SEIJO ISHII CO., LTD. andUnited Cinema Co., Ltd. in which shares were purchased by Lawson,
Inc. were newly included in its consolidated selling, general, andadministrative expenses.
Non-consolidated selling, general, and administrative expenses
amounted to 232.9 billion yen, an increase of 18.9 billion yen, or 8.9%,
compared to a year- ago period, and approx. 2.8 billion yen above
the plan. These expenses grew markedly year on year due to thefact that Ninety-nine Plus, Inc. was included in the non-consolidated
statement of income, Lawson, Inc.'s stores grew in number due to
new openings and it provided reinforced support to franchise stores.

Non-consolidated advertising and promotional expenses
totalled 8.2 billion yen, a decrease of 0.7 billion yen compared
to a year-ago period. Yet, the cost to support franchise stores tosustain the amount of inventory, a component of the Company’s
new franchise contract package, was not included in the abovementioned expenses for accounting procedure reasons. An inclusionof such cost would have resulted in non-consolidated advertisingexpenses growing by 0.9 billion yen compared to a year-ago period.
Separately, of the revenues of SCI, Inc., 5.3 billion yen was used by
Lawson, Inc. as cooperation money for assisting franchise owners.
During the year, the Company further bolstered its overall advertisingand sales promotion activities through more than doubling television
advertising spending in the second half of the year compared to a
year-ago period, among other measures.
Non-consolidated personnel expenses came to 36.6 billion yen,
an increase of 0.8 billion yen compared to a year-ago period, and 0.2
billion yen above the plan. Non-consolidated information technology(IT) costs stood at 12.7 billion yen, a decrease of 2.0 billion yen
compared to a year-ago period, and 0.2 billion yen below the plan.
The remainder of non-consolidated costs and expenses increased
by 20.9 billion yen compared to a year-ago period, exceeding theplan by 4.9 billion yen, although partly affected by the change madein the depreciation and amortization methods. This increase wasattributable to the fact that facilities costs rose due to a net increasein the number of stores, franchise store assistance payments grew
due to a shift to new franchise agreements, and expenses arose due
to revision made to the charge and fee structure arrangement withsubsidiary Lawson Mart, Inc., among other factors.

Lawson, Inc. Integrated Report 201559

Financial Section

Breakdown of Selling, General, and Administrative expenses(Fiscal Year)

Personnel expenses
Percentage composition
Advertising and promotional expenses
Percentage composition
Rent
Percentage composition
Equipment lease(Millions of Yen)

2014

2013

2012

2011

2010

60,84658,99060,01360,88758,020

20.3%

20.3%

21.7%

23.3%

23.9%

16,717

17,734

16,607

14,146

10,977

5.6%

6.1%

6.0%

5.4%

4.5%

96,87789,48584,57878,48373,231

32.3%

30.8%

30.6%

30.1%

30.2%
10,230

3,578

4,494

5,914

8,205

Percentage composition

1.2%

1.5%

2.1%

3.1%

4.2%

Depreciation and amortization

41,78847,88943,886

37,84633,084

Percentage composition

14.0%

16.5%

15.9%

14.5%

13.6%

	Depreciation of property and store
equipment*

32,95837,872

34,03028,99

24,529

		 Percentage composition

11.0%

13.0%

12.3%

11.1%

10.1%

8,830

10,017

9,856

8,847

8,555

		 Percentage composition

3.0%

3.5%

3.6%

3.4%

3.5%

Other

79,506

71,89265,31561,37557,093

26.6%

24.8%

23.7%

23.5%

23.5%

299,315

290,483

276,314260,942

242,636

100.0%

100.0%

100.0%

100.0%

100.0%

Amortization of intangible assets

Percentage composition
Total
Percentage composition*	Due to the application of new lease accounting standards, the depreciation of property and store equipment for the year ended February 28, 2011 onwards includes depreciation ofleased properties to be sold.

Operating Profit
Operating profit stood at 70.4 billion yen, an increase of
2.3 billion yen, or 3.5%, compared to a year-ago period,
supported mainly by the improving gross profit margin and thedepreciation method change, as mentioned earlier. This was
despite the fact that the Company accelerated the introductionof the MACHI café service and the “Machikado Chubo” instore kitchen feature while extending support to sustain theamount of inventory and other expenses, which were a set ofmeasures aimed at bolstering the competitiveness of individual
franchise stores amidst the challenging market environment.
Operating profit margin for all Lawson chain stores was at 3.6%,
flat compared to a year-ago period.
Income before Income Taxes and Minority Interests
Income before income taxes and minority interests amounted

to 58.3 billion yen, a decrease of 1.4 billion yen, or 2.4%,
compared to a year-ago period as the Company recorded
13.3 billion yen in extraordinary losses, including 4.2 billion
yen relating to the resolution of its Board of Directors for the
Lawson Mart and LAWSON STORE 100 business restructuringplan. This was despite the fact that non-operating income of
1.2 billion yen was posted through a foreign exchange gain
resulting from a capital decrease conducted by LAP (Lawson
Asia Pacific Holdings Pte. Ltd.), the holding company of
Lawson, Inc.’s South East Asian operations.
Net Income
As a result, net income stood at 32.6 billion yen, a decrease of
5.2 billion yen, or 14.9%, compared to a year-ago period. Net
income per share amounted to 327.08 yen.

Items of Consolidated Balance Sheet
Consolidated Balance Sheet
Current Assets
Current assets as of February 28, 2015 stood at 223.6 billion
yen, an increase of 27.8 billion yen, or 14.2%, compared to theend of previous fiscal year. This was attributable mainly to thefact that inventories rose by 7.4 billion yen, 77.6%, year on year
to 17.0 billion yen as the Company acquired SEIJO ISHII Co.,
Ltd. and SCI, Inc. expanded its product line-up, that accounts
receivable-other increased by 4.4 billion yen, or 8.2%, year on
year to 58.6 billion yen, and that prepaid expenses and othercurrent assets grew by10.4 billion yen, or 49.8%, year on year
to 31.4 billion yen.

60

Lawson, Inc. Integrated Report 2015

Property and Store Equipment & Investments and Other
AssetsProperty and store equipment as of February 28, 2015
amounted to 274.4 billion yen, an increase of 41.0 billion yen,or 17.6%, compared to the end of the previous fiscal year,
which was mainly attributable to the fact that lease assets
grew as a result of new store openings and of aggressive
renovation of existing stores involving the introduction of the
MACHI café service.
Investments and other assets as of February 28, 2015
totalled 266.5 billion yen, an increase of 74.7 billion yen, or
39.0%, compared to the end of the previous fiscal year as
goodwill grew by 38.4 billion yen in the year to February 28,
2015.

Current Liabilities
Current liabilities as of February 28, 2015 stood at 301.0 billion
yen, an increase of 54.3 billion yen, or 22.0%, compared to theend of the previous fiscal year.
In the year to February 28, 2015, accounts payable-tradegrew by 14.2 billion yen, or 16.0%, and accounts payableother by 17.7 billion yen, or 56.9%, as the Company acquired
SEIJO ISHII Co., Ltd. and SCI, Inc. expanded its product lineup. Money held as agent increased by 16.0 billion yen, or
18.3%, in the year to February 28, 2015 because the last dayof the month fell on a weekend.
Long-term Liabilities
Long-term liabilities as of February 28, 2015 amounted to
199.7 billion yen, an increase of 75.9 billion yen, or 61.4%,
compared to the end of the previous fiscal year, which was
mainly attributable to the fact that long-term debt grew by 72.9
billion yen compared to the previous fiscal year-end owing to afinancing program to fund the Company’s acquisition of sharesin SEIJO ISHII Co., Ltd. and United Cinema Co., Ltd.
Net Assets
Net assets as of February 28, 2015 amounted to 263.7 billion
yen, an increase of 13.3 billion yen, or 5.3%, compared tothe end of the previous fiscal year. Retained earnings totalled
147.1 billion yen, an increase of 9.0 billion yen as the Company
recorded 32.6 billion yen in net income and paid out 22.9
billion yen in dividends.
	Accounts Specific to the Company’s Consolidated
Balance Sheet
Shown below are accounts that are specific to the Company’sbalance sheet.
Accounts Receivable-Due from Franchise Stores
Merchandise ordered by individual franchise stores are procuredby the Company in a centralized manner, which in turn calculates
the amount of payments to individual suppliers on behalf offranchise stores before performing proxy payment service forthem. This is followed by the franchise headquarters collecting
the payment amount from each franchise store as “accounts
receivable-due from franchise stores,” which essentiallyconstitutes their obligation to the franchise headquarters. As
of February 28, 2015, accounts receivable-due from franchise
stores stood at 37.0 billion yen, an increase of 4.8 billion yen
compared to the end of the previous fiscal year.
Accounts Receivable-Other“Accounts receivable-other” include accounts receivablefrom business partners, including certain accounts receivablefrom franchise stores (franchise store credit card-based sales
proceeds). Accounts payable are composed of accounts
payable-trade, an account for directly-operated stores, andaccounts payable-due to franchise stores, an account for
franchise stores. However, accounts receivable-other include
all credit card-related accounts receivable relating to both
directly-operated and franchise stores. This is because, being
the party of agreements with credit card companies, Lawson,

Inc. is the holder of all accounts receivable from them.
As of February 28, 2015, accounts receivable-otheramounted to 58.6 billion yen, an increase of 4.4 billion yen
compared to the end of the previous fiscal year.
Long-term Loans Receivable
Long-term loans receivable consist mainly of store construction
cooperation money for landlords (store land and building
owners) and of headquarters loans to franchise stores. Money
deposited with the landlord at the time of a new store opening
was previously recorded in lease deposits, yet it is currently
recorded in long-term loans receivable. Long-term loans
receivable as of February 28, 2015 stood at 37.2 billion yen, an
increase of 3.5 billion yen compared to the end of the previous
fiscal year.
Lease Deposits
When entering into a lease agreement with the landlord, theCompany deposits with the former a security deposit worth
several months’ rent for the property. Lease deposits as ofFebruary 28, 2015 totalled 93.2 billion yen, an increase of 7.0
billion yen compared to the end of the previous fiscal year.
Accounts Payable-Due to Franchise Stores
Accounts payable-due to franchise stores refer to theheadquarters’ obligation to franchise stores. All franchise
stores’ daily sales proceeds are sent to the headquarters,
and exceed, on occasion, “accounts receivable-due from
franchise stores.” In such event, the Company records theamount in “accounts receivable-due to franchise stores” on the
consolidated balance sheet, as part of outstanding liabilities.
Accounts receivable-due to franchise stores as of February
28, 2015 totalled 1.5 billion yen, an increase of 0.1 billion yen
compared to the end of the previous fiscal year.
Money Held as Agent
Money held as agent is composed chiefly of money received
for utility bill agent payment service and money received as theprice of tickets for concerts and so on. The agency payment
service handling amount stood at 2,073 billion yen, an increaseof 4.7% compared to a year-ago period, supported by the risingnumber of transactions and payee companies, in continuation of
the growth trend. Money held as agent as of February 28, 2015
amounted to 103.6 billion yen, an increase of 16.0 billion yen
compared to the end of the previous fiscal year.
Guarantee Deposits Received from Franchise Stores and Other
Guarantee deposits received from franchise stores and otherrepresent guarantee deposits deposited to the headquarters
by franchise owners in the type G agreement with Lawson,
Inc. On March 1, 2012, the Company’s new franchise contract
package type Cn agreement came into effect, causing it tocease to conclude any type G agreement anew. As of February
28, 2015, guarantee deposits received from franchise storesand other totalled 29.9 billion yen, a decrease of 2.2 billion yen
compared to the end of the previous fiscal year, which was
attributable to reimbursements made to franchise stores as aresult of agreement renewals and terminations.

Lawson, Inc. Integrated Report 201561

Financial Section

Capital Expenditures (Including Investments/Advances and Lease Asset Acquisition Costs)

Capital Policy: Dividend and Treasury Stock Retirement

Total capital expenditures for the year ended February 28,
2015 stood at 141.2 billion yen, an increase of 57.2 billion yen
compared to a year-ago period.
Investments in new stores amounted to 49.0 billion
yen, an increase of 16.7 billion yen compared to a yearago period as the number of store openings grew year on
year. Investments in existing stores totalled 5.8 billion yen, adecrease of 1.2 billion yen compared to a year-ago period. ITrelated investments came to 8.2 billion yen, an increase of 2.8
billion yen compared to a year-ago period. Lease transactions

To return profits to shareholders is deemed by the Company to
be one of its top priority business management policies.
Thus, management runs the organization with due
regard to the levels of capital cost reflecting what investors
expect from the Company in terms of investment returns.
For this reason, we use ROE (Return on Equity), one of the
return on capital metrics, as the Company’s top priority
business management indicator in an effort to selectively
pursue businesses offering ROI above the cost of capital. The
Company holds internal reserves required to make investments
towards achieving corporate growth that is sustainable inthe medium- to long-term, and continues to preserve thestability of its financial position. Based on a rigorous selection
process, we will make investments offering the prospect ofsuperior investment returns, and strive to grow cash flows
from operating activities in a sustainable manner while
continuing to generate free cash flows. Moreover, based ona capital composition deemed appropriate by management,
the Company will distribute dividends of surplus, purchase its
own shares as treasury stock and retire them while striving toachieve return on capital above the cost of capital, thereby
aiming to attain ROE of 20% in the medium-term.

stood at 32.8 billion yen, an increase of 0.7 billion yen
compared to a year-ago period, mainly due to the introductionof the MACHI café service and the “Machikado Chubo” instore kitchen feature as well as of energy efficient equipment.
New investments and loans amounted to 42.6 billion yen, an
increase of 37.4 billion yen compared to a year-ago period
due primarily to the Company’s acquisition of shares in United
Cinema Co., Ltd. and SEIJO ISHII CO., LTD.
Shown below is the breakdown of the main capital
expenditures.

Capital Expenditures(Millions of Yen)

2014

2013

2012

2011

2010

New store investments

49,01432,23033,133

21,596

13,675

Existing store investments

5,839

7,078

8,769

10,241

8,934

IT-related investments

8,217

5,362

5,907

7,744

7,479

(Fiscal Year)

Other investments

2,752

2,067

3,238

630

1,003

Sub-total investments

65,823

46,73651,047

40,21131,091

Investments and advances

42,610

5,189

1,550

12,401

2,544

Leases*32,817

32,107

24,76521,96016,691

Total

141,251

84,03277,361

74,57250,326*	Leases are shown in an amount equivalent to the acquisition costs for the lease assets acquired during each accounting period. For the year ended February 28, 2014, expenditures for
repayment of lease obligations stood at 13,769 million yen.

Breakdown of depreciation and amortization(Millions of Yen)

2014

2013

2012

2011

2010

Depreciation of property and store
equipment*

32,97737,872

34,03028,99924,529Amortization of intangible assets

8,849

10,017

9,856

8,847

8,555

Total depreciation and amortization

41,82647,88943,886

37,84633,084(Fiscal Year)*	Due to the application of new lease accounting standards, depreciation of property and store equipment for the year ended February 28, 2011 onwards include depreciation of leaseassets to be subjected to a sale transaction.

The Company’s dividend policy does not have any
specific dividend payout ratio target. Through the process ofmaking investments necessary for its sustainable growth, theCompany aims to increase its dividend payments consistently
as a means of distributing its ample free cash flows toshareholders. The fundamental concept of its capital policy isthat such process will allow the organization to improve returnon capital without needlessly holding surplus cash internally.
For the year ending February 29, 2016, the Company intends
to pay a per-share dividend of 245 yen, an increase of 5 yen
compared to the end of the fiscal year 2015.
The Company purchased its own shares worth approx.
43.0 billion yen as treasury stock to retire them during a periodof four years from the year ended February 28, 2002 to theyear ended February 28, 2005. Moreover, it purchased its
own shares worth approx. 21.0 billion yen (approx. 5.3 million
shares) as treasury stock during the period from October2007 to January 2008 before retiring a total of 5.0 million ofsuch shares in February 2008. The Company will continue toconsider acquiring its own shares as treasury stock to retirethem in the future as a means of achieving higher ROE.

Annual dividends per share & payout ratio
(Yen)

(%)

150

500

126.3
400

120

300

90

240

Cash Flows

66.6
66.8

200

Net cash provided by operating activities for the year ended
February 28, 2015 stood at a cash inflow of 110.5 billion yen,
an increase of 29.0 billion yen compared to a year-ago period,
as deposits payable grew by 15.5 billion yen year on year.
Net cash provided by investing activities for the year
ended February 28, 2015 amounted to a cash outflow of 100.4
billion yen, an increase of 52.5 billion yen compared to a yearago period, which was chiefly due to a cash outflow of 41.3
billion yen for the purchase of stock in subsidiaries resulting in

62

Lawson, Inc. Integrated Report 2015

the change in scope of consolidation.
The cash outflow from financing activities for the year
ended February 28, 2015, amounted to 3.2 billion yen, adecrease of 36.3 billion yen compared to a year-ago period,
which was due to a cash inflow of 59.0 billion yen from longterm loans.
As a result, the cash and cash equivalents as of February
28, 2015, stood at 76.7 billion yen, an increase of 7.9 billion
yen compared to February 28, 2014.

49.8
35.3
100

0

41

23.3
41

2002

2003

49.6
41.8
90

100

2005

2006

51.2

160

160

170

72.2

200

180

60.2

220

73.4
60

57.9

110
30

70

0

2004

Annual dividends per share (left axis)

Payout ratio (right axis)

2007

2008

2009

2010

2011

2012

2013

2014
(Fiscal Year)

Lawson, Inc. Integrated Report 201563

Financial Section

Overview of major consolidated subsidiaries and equity method affiliates
Consolidated financial results for the year ended February
28, 2015 include the financial results of 17 group companies
comprising 15 consolidated subsidiaries and two equity
method affiliates. The principal business activities of Lawson,
Inc.'s subsidiaries and affiliates consist chiefly of the domestic
convenience store business, Seijo Ishii business, entertainment &home convenience business and overseas business. As a majorchange in the scope of consolidation for the year under review,
Lawson HMV Entertainment United Cinema Holdings, Inc. wasnewly established and included as a consolidated subsidiary.
Due to its acquisition of shares in United Entertainment
Holdings Co., Ltd., Lawson, Inc., its subsidiary United Cinema
Co., Ltd. was also included in the scope of consolidation.
Lawson, Inc. acquired shares in SEIJO ISHII CO., LTD. and wasincluded in the scope of consolidation as well. The following
paragraphs outline the business activities and financial resultsof Lawson, Inc.’s major consolidated subsidiaries and affiliates,
including those mentioned above.
Lawson Mart, Inc. (consolidated subsidiary)
Established on November 14, 2013, Lawson Mart, Inc. (“Lawson
Mart”) succeeded to the operational functions of Ninety-nine
Plus, Inc., including its store operation and product development,
on February 1, 2014 through an absorption-type company split
program. The former succeeded to the latter’s store-related
assets including franchise agreements for the LAWSON STORE
100 business (including those for the Lawson Market business).
Lawson Mart resolved at its Board of Directors meeting heldon January 29, 2015 to implement a business revival plan toclose down approx. 300 stores, concentrate its store areas andoverhaul its product strategy, among other steps. LAWSONSTORE 100 will meet the needs of a wide range of customers
from children to senior citizens, with a focus on single person andhomemaker customers, by offering three types of value, the “diverse
merchandise assortment” of a supermarket, the “convenience” ofa convenience store and the easy-to-understand “standardized
prices” of a 100 yen shop.
SCI, Inc. (consolidated subsidiary)
SCI, Inc. (“SCI”) was established by Lawson, Inc. in July 2012 asa supply chain management function subsidiary aimed at enabling
Lawson, Inc. to involve itself in supply chain business activities
as an influential player and to help streamline the manufacturing
and logistics operations, with the objective of becoming the“manufacturing retailer based on small commercial areas.” The
Company aims to build a manufacturing retailer business modelthat coherently covers the entire supply chain from the upstream
to the downstream, based on the efforts to reduce inefficiencies
such as waste and redundant work that occur in the supply chain
from raw materials procurement to manufacturing to logistics
to the store. Added value generated through this supply chain
management reform initiative will be leveraged by Lawson, Inc. forattaining greater product competitiveness and assisting the sales
promotion efforts of franchise owners. In the medium term, theCompany will use the know-how in this area to grow the businessof supplying raw materials and merchandise to non-group
customers.

64

Lawson, Inc. Integrated Report 2015

Lawson Okinawa, Inc. (equity-method affiliate)
In January 2009, Lawson, Inc. entered into a business allianceagreement with SAN-A CO., LTD. (“SAN-A”), the largest integrated
retailer in Okinawa, concerning their operations in the prefecture.
Through this alliance with SAN-A, an unrivalled player there in loyal
customer following, we desire to deliver services better suiting local
needs and to offer a merchandise and store environment befitting
local consumer tastes, in a prefecture that has unique lifestyle andfood preferences. To this end, we established Lawson Okinawa,
Inc. in October 2009 as a wholly-owned subsidiary of Lawson, Inc.
Subsequently, in December 2009, 51% of the total shares
outstanding in Lawson Okinawa, Inc. were sold to SAN-A to run asa joint venture.
For the year ended February 28, 2015, Lawson Okinawa,
Inc. had a total of 174 stores at the period-end date, and operating
profit stood at 1,100 million yen, an increase of 12.5% compared
to a year-ago period.
We will continue to have Lawson Okinawa, Inc. strive to build
a store environment meeting local needs appropriately, thus growing
Lawson chain stores in Okinawa in the coming years.
Lawson Okinawa, Inc.

(Millions of Yen)

(Fiscal Year)

2014

2013

2012

2011

2010

Gross operating revenues

4,674

4,199

3,954

3,659

3,347

Operating profit

1,182

1,051

924

780

601

Net income

738

792

799

1,049

612

Number of stores

174

163

154

147

141

Lawson Minami-Kyushu, Inc. (equity method affiliate)
Lawson Minami-Kyushu, Inc. (“Lawson Minami-Kyushu”) wasestablished in May 2013 as a wholly-owned subsidiary of Lawson,
Inc. before launching Lawson store operations in Kagoshima in
August the same year. Subsequently, in March 2014, Nangoku
Corporation took a 51% equity participation in Lawson MinamiKyushu (Lawson, Inc.’s equity interest ratio became 49%) to acquire
Lawson, Inc.’s Kagoshima operations before starting to run Lawson
stores in the prefecture in the form of a joint venture with it.
For the year ended February 28, 2015, Lawson MinamiKyushu had a total of 202 stores at the period-end date, andoperating profit stood at a negative 400 million yen. We willcontinue to have Lawson Minami-Kyushu strive to build a store
environment meeting local needs appropriately, thus growing
Lawson chain stores in Kagoshima in the coming years.
SEIJO ISHII CO., LTD. (consolidated subsidiary)Supermarket operator SEIJO ISHII CO., LTD. (“Seijo Ishii”) is a firmthat has achieved outstanding brand appeal by using its superior
merchandising skills to deliver high added value, with the aim of
becoming a company that is “committed to ensuring food quality
excellence and helping create a better world to live in.” Its existing
network of “SEIJO ISHII” brand supermarkets, renowned for
quality, consists of 107 stores located mainly in the Kanto area (asof February 28, 2015).
At a time when we aspire to become a “manufacturingretailer based on small commercial areas,” it is the manufacturingretailer function that Lawson, Inc. has in common with Seijo Ishii,
a player committed to “delivering delicious food offerings,” basedon its unique platform, while developing and manufacturing safeand reliable merchandise. Lawson decided to acquire all shares in
Seijo Ishii in the belief that significant potential would be offered by
the partnership with the supermarket operator, a player delivering
services that are highly differentiated from those of general andluxury supermarket chains. Based on this partnership, we willleverage its manufacturing retailer know-how, such as in central
kitchen operations, for further bolstering our domestic convenience
store business.
Non-consolidated operating profit for the three months of
the 4th quarter of Seijo Ishii, whose financial results are includedin Lawson, Inc.’s consolidated statement of income, stood at 1.5
billion yen.
Lawson HMV Entertainment, Inc. (consolidated subsidiary)
Lawson HMV Entertainment, Inc. (“Lawson HMV Entertainment”)
distributes tickets for concerts, sporting events, theaters andcinemas mainly through multimedia information terminal “Loppi”
in Lawson stores and the “L-Tike.com” website. The company isparticularly strong in the areas of J-pop and sporting event ticket
sales. Holding a top-class position in the industry in ticket sales
quantity, Lawson HMV Entertainment has been expanding its
operations in a steady manner.
Established in 1992 as RIZA JAPAN, primarily a ticket
distributor, the company changed its name to Lawson Ticketin 1996 before being included in Lawson, Inc.’s scope of
consolidation as a subsidiary in 1997.
In order to make the most of the customer interface provided
by Lawson Ticket as well as the e-commerce business know-how
and mechanism developed by i-Convenience, Inc, then a whollyowned Lawson, Inc. subsidiary, these two subsidiaries merged in
March 2009, with Lawson Ticket as the surviving company. In July
2009, the company changed its name to Lawson Entermedia, Inc.
It was listed on the Osaka Securities Exchange JASDAQ Market
but was delisted in June 2010. The company then became awholly-owned subsidiary of Lawson, Inc. in July 2010 through ashare swap transaction.
In September 2011, Lawson Entermedia, Inc. and our
subsidiary HMV Japan K.K.* merged to form Lawson HMVEntertainment with the aim of achieving increased synergy between
the entertainment and e-commerce businesses of the Lawson
Group going forward. Lawson HMV Entertainment in the future
will be able to leverage the Group’s solid e-commerce businessplatform to provide one-stop shopping convenience to customers
by, for instance, enabling those now buying concert tickets andCDs for a given artist separately to make purchases in one single
action. The company is likely to generate good synergy between
the HMV brand’s competitive edge in the CD music industry andLawson Ticket’s footprint in the ticket distribution industry.
As for Lawson HMV Entertainment’s revenue structure,commission revenues on ticket sales currently account for thebulk of its revenues. Its operating revenues mainly comprisingcommissions are recorded as “operating revenues- other” in the
consolidated statement of income of Lawson, Inc.
For the year ended February 28, 2015, Lawson HMVEntertainment’s operating profit stood at 3.0 billion yen, an
increase of 9.8% compared to a year-ago period, supported bystrong ticket sales mainly for major concerts.
*	HMV Japan K.K. (a consolidated subsidiary of Lawson, Inc. until August 31, 2011) wasa retailer selling CDs and DVDs under the HMV brand. Established in 1990, the firm
opened its first store in Shibuya, Tokyo that year. The company in 1999 launched the“HMV Online” service to commence its current e-commerce business. In 2007, HMV
Japan Holdings Co., Ltd., all shares of which were owned directly or indirectly by Daiwa

Securities SMBC Principal Investments Co., Ltd., acquired all shares in HMV Japan K.K.
In December 2010, Lawson, Inc. acquired all of the shares from HMV Japan Holdings
Co., Ltd. in an effort to reinforce its entertainment business and achieve increased
synergies with Lawson Entermedia, Inc.

Lawson HMV Entertainment, Inc.

(Millions of Yen)

(Fiscal Year)

2014

2013

2012

2011

2010

Gross operating revenues

46,01845,31345,481

25,545

9,864

Operating profit

3,093

2,818

2,446

1,650

1,111

Net income

2,918

2,450

2,450

2,073

1,870

Lawson ATM Networks, Inc. (consolidated subsidiary)
Lawson ATM Networks, Inc. (“Lawson ATM Networks”) wasestablished in 2001 with investments from Mitsubishi Corporation,
partner banks and Lawson, Inc., as a provider of automatedteller machine (ATM) services for Lawson stores. The company
installed ATMs at certain Lawson stores that year to launch the
ATM service, which comprises the installation of multibank ATMs
at Lawson stores in areas for which ATM installation agreement isreached with individual partner banks. Revenues, consisting mainlyof an ATM operation service fee from such banks, are recorded
as “operating revenues-other” in Lawson, Inc.’s consolidated
statement of income. Principal expenses are composed chiefly of
operation center contract service fees, ATM line costs and ATM
equipment lease fees.
Operating income for the year ended February 28, 2015,
stood at 5,900 million yen, more or less in line with the plan, albeit
slightly down year on year, as the company installed a growing
number of ATMs at Lawson stores.
During the year, Lawson ATM Networks continued to add to
its list of ATM service partner banks, bringing the total to 71 banks
based in Japan, including online banks, as of February 28, 2015,
an increase of six banks compared to a year ago. The number ofATMs in operation at Lawson stores nationwide totalled 10,767, anincrease of 649 year on year.
Lawson ATM Networks, Inc.

(Millions of Yen)

(Fiscal Year)

2014

2013

2012

2011

2010

Gross operating revenues

23,56624,18823,97523,063

20,826

Operating profit

5,935

6,089

4,753

3,640

3,159

Net income

3,605

3,689

2,712

1,993

1,788

Number of ATMs in operation (unit)

10,767

10,118

9,672

9,002

8,526

United Cinema Co., Ltd. (consolidated subsidiary)
In August 2014, Lawson, Inc. acquired all shares in UnitedEntertainment Holdings, Inc., a holding company of cinema operator
United Cinema Co., Ltd. (“UC”), in a deal newly conducted via
Lawson HMV Entertainment United Cinema Holdings, Inc., a firm
established by Lawson HMV Entertainment, Inc.
UC is Japan’s third-largest cinema operator running 36
cinemas in the country (including partner cinemas) with 331
screens in combined total as of February 28, 2015. Thus, adding
the firm to the Lawson Group will enable it to step up its contents
holder service as an integrated entertainment distributor, and toboost its existing business lines’ customer drawing power throughcollaborating with movie contents holders and encouraging its
Lawson, HMV, e-commerce and cinema operations to guidecustomers to each other’s service. Non-consolidated operating
profit for the four months from September to December 2014of UC, whose financial results are included in Lawson, Inc.’s
consolidated statement of income, amounted to 100 million yen.

Lawson, Inc. Integrated Report 201565

Financial Section

Shanghai Hualian Lawson, Inc. (consolidated subsidiary)
We were the first Japanese convenience store company to gaina foothold in China with our first store opening in 1996. We
established Shanghai Hualian Lawson, Inc. (“Shanghai Hualian
Lawson”) in Shanghai, with Lawson, Inc. taking a 70.0% equity
stake in the firm and Hualian Group Co., Ltd. (“Hualian Group”)*, a
Shanghai city government-related company, the remaining 30.0%
equity stake in it.
With the aim of acquiring land and buildings in good
locations and motivating local employees better, we transferredto the Hualian Group 21.0% of equity interest in Shanghai Hualian
Lawson, out of our 70.0% equity interest in the firm, reducing ourownership in it to 49.0%. Subsequently, in response to changes
in China’s (Shanghai’s) economic environment, we recognized
the need to reinforce the Japanese-style convenience store
concept. Accordingly, in September 2011, we began to again
acquire incremental shares in Shanghai Hualian Lawson to regain
management control of the company. After we brought our equity
interest in Shanghai Hualian Lawson to 85.0%, the company was
included in Lawson, Inc.’s scope of consolidation as a subsidiary.
Lawson, Inc. carried out the above-mentioned incremental shareacquisition program in order to accelerate its efforts to pursue theJapanese-style convenience store business model that is superior
in product development, customer interaction, and cleanliness.
This program, aimed at strengthening and expanding our China
business, was done by concluding a share transfer agreementwith Bailian Group Co., Ltd. (“Bailian Group”)*, whose retail division
restructuring was underway. Our equity interest in Hualian Lawson
was raised even further since, standing at 94.0% as of February
28, 2015. The company aims to upgrade the quality of Lawson
stores in Shanghai, the economic center of China, and achieve
increased store brand appeal while focusing on ROI, a criterion
used for new store opening in the country, as in Japan.
The total number of Lawson stores in operation stood at 354
as of February 28, 2015.
*	Through a restructuring of China’s retail industry driven by the national government, theHualian Group was merged into the Bailian Group. In the course of this restructuring, allshares in the Hualian Group were transferred to the Bailian Group in December 2008.

Shanghai Hualian Lawson, Inc.

(Millions of Yen)

(Fiscal Year)

2014

2013

2012

2011

2010

Gross operating revenues

1,359

1,289

903

4,917

5,402

Operating profit (loss)

(645)

(404)

(574)

(283)

15

Net income (loss)(924)(1,568)(2,034)(443)

25

Number of stores

354

289

305

314

31

Chongqing Lawson, Inc. (consolidated subsidiary)
Populated by 33 million people (2014 JETRO survey), Chongqing
is one of the world’s biggest cities, and is China’s fourth largest
city trailing only Beijing, Shanghai, and Tianjin in population
size. It is one of the nation’s direct-controlled municipalities. The
city has continued to enjoy double-digit economic growth for
10 consecutive years (2014 JETRO survey). This double-digit
economic growth rate exceeds the national average and that ofcoastal cities such as Shanghai. It is against this backdrop that
potential demand for convenience stores in China’s fast-growing
inland cities is increasing.
We established Chongqing Lawson, Inc. in April 2010 togain a foothold in inland China as the first Japanese convenience
store company to operate there at the invitation of the city. The first
local Lawson store was opened in July the same year as a store

66

Lawson, Inc. Integrated Report 2015

equipped with a staff training facility. The Lawson store network
has continued to grow steadily since, bringing the total store countto 104 as of February 28, 2015.
Chongqing Lawson, Inc.

(Millions of Yen)

(Fiscal Year)

2014

2013

2012

2011

Gross operating revenues

3,473

1,843

977

258

30

Operating profit (loss)

(903)

(840)

(671)

(243)

(47)

Net income (loss)(1,046)

(832)

(775)

(249)

(59)

Number of stores

104

77

49

38

47

2010

Dalian Lawson, Inc. (consolidated subsidiary)With a population of some six million (2014 JETRO survey), Dalianis the biggest port city in Northeast China. Following an invitationby the city of Dalian to commence convenience store operations
there, we established Dalian Lawson, Inc. in September 2011 asa joint venture with local enterprise Dalian Acasia Fast Foods Co.
before opening the first local Lawson store in November the same
year. Currently, our equity stake in the company is 98.3%. The
number of its Lawson stores stood at 30 as of February 28, 2015.
In the city of Beijing, we established Beijing Lawson, Inc.
(non-consolidated company) in May 2013. The company opened
14 stores in the year ended February 28, 2015, bringing the total
number of stores to 19 as of the date.
Dalian Lawson, Inc.

(Millions of Yen)

(Fiscal Year)

2014

2013

2012

2011

Gross operating revenues

995

515

176

4

Operating profit (loss)

(312)

(226)

(163)

(21)

Net income (loss)

(338)

(210)

(196)

(27)

Number of stores

30

18

8

3

2010

Establishedin Sep. 2011

Lawson Asia Pacific Holdings Pte. Ltd. (consolidated
subsidiary)
In May 2011, Lawson Asia Pacific Holdings Pte. Ltd. (“Lawson Asia
Pacific Holdings”) was established in Singapore as a wholly-owned
consolidated subsidiary charged with managing Lawson, Inc.’s all
non-China overseas operations. We signed a license agreementin June 2011 with PT MIDI UTAMA INDONESIA Tbk (“MIDI”), a
member of the Alfa Group, a major Indonesian distribution andretail firm. Lawson Asia Pacific Holdings acquired a 30% equity
stake in MIDI in July 2011. As of February 28, 2015, MIDI had
574 stores in operation comprising those under the Alfamidi store
brand, a proprietary small-sized store format, and the Alfaexpress
store brand while running 48 Lawson stores mainly in Greater
Jakarta. In December 2014, Lawson, Inc. sold all its shareholdingin then equity-method affiliate MIDI. While we acquired an equity
stake of 2.24% in PT Sumber Alfaria Trijaya, MIDI’s parent
company, it is currently not within the scope of our consolidation.
In Thailand, Lawson Asia Pacific Holdings established Saha
Lawson Co., Ltd. in November 2012 as a joint venture principallywith the SAHA Group, Thailand’s leading consumer goods
distributor. In March 2013, this joint venture launched Lawson
convenience stores under the “LAWSON 108” brand in Bangkok.
As of February 28, 2015, the company had 32 Lawson stores inoperation.

Outlook for Fiscal 2015
Deeming the year ending February 28, 2016 to be a year for us to fortify
the foundation for Lawson, Inc. to continue growing in the future, wewill pursue the structural reform composed mainly of the initiatives to“strengthen store capability,” “improve merchandise assortment” and“better support franchise owners” while reinforcing Lawson stores’ basic
platform as a convenience store chain, in an effort to make them meetsociety’s changing needs properly and remain loved by customers.
A program to invigorate existing Lawson stores in Japan
In order to further grow and develop with franchise stores, we will bringforward the introduction of a new franchise contract package designed
for the franchise headquarters to bear part of store electricity bills andmerchandise disposal loss, thereby building a platform in which theheadquarters share greater risks with franchise stores while striving toachieve increased profits. Moreover, we will introduce at Lawson storesa semi-automatic ordering system using each store’s Ponta member
data, a move that will help us create an in-store environment that offersa merchandise assortment befitting each store and allows the customer
to buy what he/she wants when he/she needs it.
Meanwhile, we will continue to make existing stores-related
investments in earnest such as the wider introduction at Lawson storesof the “Machikado Chubo” in-store kitchen feature and the expanded
installation there of store fixtures to cater for shoppers’ supermarket
goods substitution needs for frozen food and so on.
Delivery of required and value-added merchandise
On the merchandise front, we will boost LAWSON stores’ merchandise
assortment to make available items required by customers while
continuing to deliver higher added value to customers in the form of
the MACHI café service, “Machikado Chubo” in-store kitchen featureand over-the-counter fast food service. Moreover, through actively
conducting customer drawing stimulation programs such as pricediscounting sale and TV commercial campaigns, we will strive to ensurethat existing store sales, now remaining persistently in the negative
territory, will recover to a flat level year on year, thereby enabling
franchise stores to achieve improved profits even in the face of thechallenging environment marked by the labor shortage and rising costsof various items.

category involving sales of merchandise with a higher gross profit
ratio, thus attaining the increased operating gross profit margin for theCompany.
As for selling, general, and administrative expenses, franchise
store assisting expenses are projected to grow by approx. 2.0 billion to
3.0 billion yen year on year for the year ending February 28, 2016 as theCompany plans to bring forward the introduction of the new franchisecontract package targeting 3,000 stores or so. In addition, we intend
to increase advertising expenses for the year by 2.0 billion yen or morecompared to the previous year with the aim of bolstering the customer
drawing power of Lawson stores. These steps are likely to result in nonconsolidated selling, general, and administrative expenses rising by
5% to 10% year on year. Non-consolidated operating profit for the year
ending February 28, 2016 is projected to decline by 4.0% year on year
to 58.5 billion yen, greatly affected by the above-mentioned measures
to allocate higher expenses with the aim of making sure to improve
franchise stores’ profits and allow existing stores to attain 100% daily
sales equivalent to those of a year ago.
Income contribution by consolidated subsidiaries
SEIJO ISHII CO., LTD. and United Cinema Co., Ltd., two firms to be
included in the scope of Lawson, Inc.’s consolidation on a full-yearbasis starting from the year ending February 28, 2016, are projected toachieve a year-on-year gain in operating profit, posting 4.9 billion yen
and 1.1 billion yen, respectively. The former and the latter expect toincur company acquisition-induced goodwill amortization of 0.8 billion
yen and 0.5 billion yen, respectively.
Full-scale implementation of the home convenience-related
business
We will leverage the Lawson Group’s over-10,000-strong real store
network to implement the home delivery service, a type of service
providing great convenience to local community customers. As partof the initiative, Lawson, Inc. in April 2015 entered into a business
partnership agreement with SG HOLDINGS, CO., LTD., the corecompany of which is SAGAWA EXPRESS CO., LTD. We will continue toexpand the scope of our partner firms in the coming years, striving tobuild an open platform.

New store opening plan focusing on location and profitability
prospect
Adhering to its basic policy of focusing on profitability prospects, theCompany plans to open 1,200 new LAWSON stores, including thoserun by merchants migrating to the LAWSON store format based on a
new partnership agreement. While working harder to promote store
relocation to better locations, we will close down 450 LAWSON storesin the year. Meanwhile, 300 LAWSON STORE 100 stores will be shut
down due to the business revival plan, bringing the Company’s net store
increase to 450 for the year ending February 28, 2016.

Overseas business development
Our overseas business is anticipated to post an aggregated total of 3.4
billion yen in operating loss for the year ending February 28, 2016. Whilecontinuing to open new stores in each country in a discreet manner, we
will endeavour to achieve higher profitability. MIDI of Indonesia will be
excluded from the scope of Lawson, Inc.’s consolidation as it sold its
shareholding in the firm in the previous year. Philippines firm PG Lawson,
Inc. the first LAWSON store of which was opened on March 30, 2015,
will not be included in the scope of Lawson, Inc.’s consolidation for theyear ending February 28, 2016 as its business is small in size.

Optimization of gross profit margin and costs
We aim to achieve a gross profit margin of 31.5%, an increase of 0.2
percentage points compared to a year-ago period. At a time when
yen weakness and rising raw materials prices have been persistingsince 2014, the Company will maximally leverage the supply chain
function subsidiary SCI, Inc. for securing raw materials nimbly andswitching to domestically-produced raw materials, thereby curbing cost
ratio deterioration. Moreover, we will further expand our traditionallycompetitive over-the-counter fast food service offerings, a service

Business performance outlook for fiscal 2015
For the year ending February 28, 2016, consolidated operating profit
is projected at 71.0 billion yen, an increase of 0.7% year on year as
earnings contribution should be made by SEIJO ISHII CO., LTD. on
a full-year basis while non-consolidated operating income is likely todecline year on year. The net profit is projected at 35.2 billion yen, an
increase of 7.7% year on year, and ROE is projected at 13.5%, anincrease of 0.5 of a percentage point year on year.

Lawson, Inc. Integrated Report 201567

Financial Section

Consolidated Balance Sheet
Lawson, Inc. and Consolidated Subsidiaries
February 28, 2015

Thousands of
U.S. Dollars(Note 1)Millions of Yen

ASSETS

2015

2015

2014

Cash and cash equivalents
Time deposits

Millions of Yen

LIABILITIES AND EQUITYCURRENT ASSETS：

Thousands of
U.S. Dollars(Note 1)

2015

2015

2014

CURRENT LIABILITIES:¥76,755¥68,760$643,540

4

8,004

34

Accounts receivable:

Accounts payable:¥103,459¥89,171$867,435

Due to franchised stores (Note 9)

1,508

1,405

12,644

Other

48,99031,214

410,749

Trade (Notes 8 and 20)

Due from franchised stores (Notes 4 and 9)

37,05232,186

310,656

Other

58,66754,193491,884

Short-term bank loans (Note 10)

1,740

680

14,589Allowance for doubtful accounts(2,579)(2,393)(21,623)

Current portion of long-term debt (Note 10)20,523

16,586

172,072

Inventories

17,044

9,596

142,902

Income taxes payable

13,301

14,330111,520

Deferred tax assets (Note 15)

5,300

4,481

44,437

Money held as agent

103,634

87,586

868,902

Accrued expenses and other current liabilities

Prepaid expenses and other current assets
Total current assets

31,40020,957263,268

223,643

195,784

1,875,098

9,640

8,774

80,825

Buildings (Note 6)

318,679

268,930

2,671,913

Furniture, fixtures, and equipment (Note 6)

74,271

65,945

622,713

Lease assets (Note 17)

154,932

126,056

1,299,002

Other (Note 6)
Total
Accumulated depreciation
Net property and store equipment

5,735

66,353

246,7072,524,264

Liability for employees' retirement benefits (Note 11)12,95911,083

108,653

Allowance for retirement benefits to executive officers
and audit and supervisory board members

368

408

3,085

Guarantee deposits received from franchised storesand other

29,99332,253

251,471

Long-term debt (Note 10)

134,599

61,667

1,128,524

Asset retirement obligations (Note 12)

21,53017,875

180,515

298

502

2,498

199,747

123,788

1,674,746

Common stock̶authorized, 409,300,000 shares in 2015
and 2014; issued, 100,300,000 shares in 2015 and 2014

58,50758,507490,542

47,69747,741

399,908

223

557

1,870

147,177

138,142

1,233,982(1,272)(1,556)(10,665)

(394)

(94)

(3,303)

LONG-TERM LIABILITIES:PROPERTY AND STORE EQUIPMENT:Land (Notes 6 and 7)

7,914
301,069

Total current liabilities

572

4,796

558,094

469,705

4,679,249(283,657)(236,268)(2,378,276)

274,437

233,4372,300,973

Other
Total long-term liabilities

EQUITY (Note 13):INVESTMENTS AND OTHER ASSETS:
Investment securities (Note 5)

8,334

2,276

69,875Investments in associated companies

11,447

10,982

95,976Long-term loans receivable

37,23333,728312,174

Capital surplus

Goodwill (Note 6)

48,1899,719

404,033

Stock acquisition rights

Software (Note 6)

18,80018,263

157,625

Retained earnings

Trademark right

11,990106

100,528

Lease deposits

93,20686,150781,471

Treasury stock̶at cost, 395,953 shares in 2015
and 406,853 shares in 2014

Deferred tax assets (Note 15)

26,252

21,628220,106

Other (Note 6)

12,204

9,886

102,322

Allowance for doubtful accounts(1,121)(966)(9,399)Total investments and other assets
TOTAL
See notes to consolidated financial statements.

Accumulated other comprehensive income:Net unrealized loss on available-for-sale securities
Land revaluation difference (Note 7)

(566)

(567)

(4,746)

5,493

3,118

46,055245,848

2,149,292

266,534

191,772

2,234,711

Foreign currency translation adjustments¥764,614¥620,993$6,410,782

Defined retirement benefit plans
Total

Lawson, Inc. Integrated Report 2015

(4,351)

Minority interests

7,452

4,650

62,480Total equity

263,798

250,498

2,211,772¥764,614¥620,993$6,410,782

TOTAL

68

(519)
256,346

Lawson, Inc. Integrated Report 201569

Financial Section

Consolidated Statement of Income

Consolidated Statement of Comprehensive Income

Lawson, Inc. and Consolidated Subsidiaries
Year Ended February 28, 2015

Lawson, Inc. and Consolidated Subsidiaries
Year Ended February 28, 2015

Thousands of
U.S. Dollars(Note 1)Millions of Yen

2015

2015
NET INCOME BEFORE MINORITY INTERESTSFranchise commissions from franchised stores¥247,681¥242,079$2,076,641

Net sales

174,044

168,159

1,459,244

Other
Total operating revenues

Millions of Yen

2015

2014

OPERATING REVENUES:

76,18875,010638,786

497,913

485,248

4,174,671

Unrealized loss on available-for-sale securities
Land revaluation difference
Foreign currency translation adjustments
Total other comprehensive income

Cost of sales (Note 20)

128,116

126,638

1,074,168

Selling, general, and administrative expenses

299,315

290,483

2,509,558

Total costs and operating expenses

427,431

417,121

3,583,726

Operating income

70,482

68,127590,945COMPREHENSIVE INCOME

Minority interests

Interest expense̶net

(658)

(405)

Compensation income(5,517)

1,585

272

13,289Loss on cancellation of leases(1,168)(571)(9,793)(2,967)(2,648)(24,876)(5,744)(69,280)

Gain on sales of noncurrent assets(1,520)

Impairment of long-lived assets (Note 6)(8,263)

Other̶net(172)(2,515)

2,655

8,066

1
962

8

1,441

(839)

12,082

2,104

1,644

17,641¥35,224¥39,807$295,330¥34,762¥39,733$291,456

462

74

3,874

See notes to consolidated financial statements.

(12,744)

880

(91)

7,378

(12,111)(8,341)(101,543)

58,371

59,786

489,402

Current

24,93926,759209,097

Deferred312(5,136)

2,616

25,251

21,623211,713

33,12038,163

277,689

(433)

(197)

(3,630)¥32,687¥37,966$274,059

INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS

(300)

51

Loss on liquidation of business

Other expenses̶net$277,689

795

Foreign exchange gains

Loss on disposal of property and store equipment¥38,163

TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO(Note 18):
Owners of the parent

OTHER (EXPENSES) INCOME:

2015

2014

¥33,120OTHER COMPREHENSIVE INCOME:

Share of other comprehensive income in associated companies
COSTS AND OPERATING EXPENSES:

Thousands of
U.S. Dollars(Note 1)

INCOME TAXES (Note 15):

Total income taxes
NET INCOME BEFORE MINORITY INTERESTSMINORITY INTERESTS IN NET INCOME
NET INCOME

Yen

2015

U.S. Dollars

2015

2014

PER SHARE OF COMMON STOCK (Notes 2.t and 22):
Net income̶basic¥327.08¥380.04$2.74

Net income̶diluted

326.65379.35

2.74

240

220

2.01

Cash dividends applicable to the year
See notes to consolidated financial statements.

70

Lawson, Inc. Integrated Report 2015

Lawson, Inc. Integrated Report 201571

Financial Section

Consolidated Statement of Changes in Equity
Lawson, Inc. and Consolidated Subsidiaries
Year Ended February 28, 2015

Thousands of Shares/Millions of Yen
Common Stock

BALANCE, MARCH 1, 2013

Stock
Acquisition
RightsSharesAmountCapitalSurplus100,300¥58,507¥47,718¥427

Net income
Year-end cash dividends, ¥100 per share
Interim cash dividends, ¥110 per share
Purchase of treasury stock¥121,154

22

Treasury Stock
SharesCommonStock

Amount(407)¥ (1,594)

(1)

(11)

12

48

1
100,300

58,507

Exercise of stock acquisition rights
to shares (delivery of treasury stock)
Disposal of treasury stock
Others̶net
BALANCE, FEBRUARY 28, 2015

Retained
Earnings

37,966(9,989)(10,989)

Exercise of stock acquisition rights
to shares (delivery of treasury stock)
Disposal of treasury stock
Others̶net
BALANCE, FEBRUARY 28, 2014
Net income
Year-end cash dividends, ¥110 per share
Interim cash dividends, ¥120 per share
Change of scope of equity method
Reversal of land revaluation difference
Purchase of treasury stockThousands of U.S. Dollars (Note 1)

130
557

47,741138,142
32,687(10,989)(11,990)
(608)
(1)

(45)

(64)

0

1

(396)

(1,556)

100,300¥58,507¥47,697

(40)

(290)

135

573

0

1

301

¥ (1,272)

BALANCE, MARCH 1, 2013
Net income
Year-end cash dividends, ¥100 per share
Interim cash dividends, ¥110 per share
Purchase of treasury stock¥78¥ (567)¥1,180Exercise of stock acquisition rights
to shares (delivery of treasury stock)
Disposal of treasury stock
Others̶net
BALANCE, FEBRUARY 28, 2014
Net income
Year-end cash dividends, ¥110 per share
Interim cash dividends, ¥120 per share
Change of scope of equity method
Reversal of land revaluation difference
Purchase of treasury stock

(172)
(94)

(567)

1,938
3,118

Exercise of stock acquisition rights
to shares (delivery of treasury stock)
Disposal of treasury stock
Others̶net
BALANCE, FEBRUARY 28, 201572

Lawson, Inc. Integrated Report 2015

DefinedRetirement
Benefit Plans

Minority
Interests

Total¥226,903
37,966(9,989)(10,989)(11)¥3,2791¥ (566)

2,375¥5,493¥230,182
37,966(9,989)(10,989)
(11)

70

70

2
1,896
245,848
32,687(10,989)(11,990)
(608)
(1)
(290)

2
3,267
250,498
32,687(10,989)(11,990)
(608)
(1)
(290)

1,371
4,650

464

(300)
¥ (394)

Total
Equity2¥ (519)1,223¥ (519) ¥256,346$1,158,229(92,135)

Interim cash dividends, $1.01 per share(100,528)

Change of scope of equity method$ (13,046)(5,098)

Reversal of land revaluation difference(8)

Purchase of treasury stock(2,431)

Exercise of stock acquisition rights toshares (delivery of treasury stock)

(377)

(537)

4,804

8

8

Others̶net

Accumulated Other Comprehensive Income
Land
Revaluation
Difference$4,670Year-end cash dividends,$0.92 per shareshare(2,800)$490,542$399,908$1,870$1,233,982$ (10,665)

Thousands of U.S. Dollars (Note 1)
Accumulated Other Comprehensive Income
Net Unrealized
Loss onAvailable-forSale Securities$ (788)Land
Revaluation
Difference

Foreign
Currency
Translation
Adjustments$ (4,754)$26,142

DefinedRetirement
Benefit Plans

Minority
Interests

Total

Total
Equity$2,061,272$38,987 $2,100,259

Net income

274,059

274,059

Year-end cash dividends,$0.92 per shareshare(92,135)(92,135)

Interim cash dividends, $1.01 per share(100,528)(100,528)(5,098)(5,098)(8)(8)

Purchase of treasury stock(2,431)(2,431)

Exercise of stock acquisition rights toshares (delivery of treasury stock)

3,890

3,890

16

16

BALANCE, FEBRUARY 28 2014

Foreign
Currency
Translation
Adjustments$400,277

TreasuryStock274,059

BALANCE, FEBRUARY 28, 2015

Thousands of Shares/Millions of Yen

Net Unrealized
Loss onAvailable-forSale Securities$490,542

Retained
Earnings

Net income

Disposal of treasury stock

1(334)¥223 ¥147,177

BALANCE, FEBRUARY 28 2014

Stock
Acquisition
RightsCapitalSurplus

Change of scope of equity method
Reversal of land revaluation difference

Disposal of treasury stock
Others̶net
BALANCE, FEBRUARY 28, 2015

(2,515)

8

19,913$ (4,351)$ (3,303)$ (4,746)$46,055$ (4,351) $2,149,292

10,25523,49333,748$62,480 $2,211,772

See notes to consolidated financial statements.

464

2,802
¥7,452

2
4,025¥263,798

Lawson, Inc. Integrated Report 201573

Financial Section

Consolidated Statement of Cash Flows
Lawson, Inc. and Consolidated Subsidiaries
Year Ended February 28, 2015

Thousands of
U.S. Dollars(Note 1)Millions of Yen

Thousands of
U.S. Dollars(Note 1)Millions of Yen

2015

2014

2015

¥58,371¥59,786$489,402

Income taxes paid

(26,176)(26,956)(219,468)

Proceeds from stock issuance to minority shareholders

2,000

16,769Depreciation and amortization

41,82647,889350,683

Proceeds from long-term debt

59,000494,676

Impairment of long-lived assets

8,263

5,744

69,280

Other̶net(Reversal of) provision for allowance for doubtful accounts

(171)

565

(1,435)

Loss on disposal of property and store equipment

2,967

2,648

24,876

Loss (gain) on sales of investment securities̶net

760

(404)

6,372

OPERATING ACTIVITIES:
Income before income taxes and minority interests

2014

2015

Repayments of long-term debt

(42,122)(17,663)(353,165)

Cash dividends paid

(22,979)(20,978)(192,663)

FINANCING ACTIVITIES:

Adjustments for:

Changes in assets and liabilities:
Increase in accounts receivable2015(8,025)(14,256)(67,284)812(1,009)6,808(3,289)(39,650)(27,575)

FOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON CASH AND
CASH EQUIVALENTS

1,150

2,065

9,642

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

7,995(4,006)

67,033

Net cash used in financing activities

Increase in inventories(2,589)(211)(21,707)

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

68,76072,766

576,507

Increase in accounts payable

26,2895,569

220,416

CASH AND CASH EQUIVALENTS, END OF YEAR

¥76,755¥68,760$643,540

Increase in money held as agent

15,61050

130,879

See notes to consolidated financial statements.

Increase in allowance for retirement benefits to employees
and executive officers and audit and supervisory board members

1,684

1,260

14,120(2,308)(2,559)(19,351)

Decrease in guarantee deposits received from franchised
stores and other
Other̶net(5,933)

2,378(49,744)

52,197

21,717437,637

110,568

81,503927,039

Payments into time deposits(11,204)(22,000)(93,938)

Proceeds from withdrawal of time deposits

19,20426,000161,013Purchase of investment securities(6,507)(45)(54,557)

Purchases of property and store equipment(41,053)(34,857)(344,202)

Purchases of software and other intangible assets(7,902)(5,499)(66,253)

Purchase of long-term prepaid expenses(3,806)(2,373)(31,911)

Total adjustments
Net cash provided by operating activities
INVESTING ACTIVITIES:

Decrease (increase) in short-term loans receivable

3,135(4,145)26,285

Increase in long-term loans receivable(4,633)(2,000)(38,845)

Purchase of investments in subsidiaries resulting in change inscope of consolidation(41,381)

Acquisition of a subsidiary, net of cash acquired
Acquisition of associated companies
Other̶net
Net cash used in investing activities

74

Lawson, Inc. Integrated Report 2015

(346,952)
1,733(3,335)(4,052)(27,962)(2,952)(686)(24,751)(100,434)(47,924)(842,073)

Lawson, Inc. Integrated Report 201575

Financial Section

Notes to Consolidated Financial Statements
Lawson, Inc. and Consolidated Subsidiaries
Year Ended February 28, 2015

1 BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS

Subsidiaries for the Consolidated Financial Statements. PITF No. 18 prescribes that the accounting

The accompanying consolidated financial statements have been prepared in accordance with the provisions

policies and procedures applied to a parent company and its subsidiaries for similar transactions andset forth in the Japanese Financial Instruments and Exchange Act and its related accounting regulations and in

events under similar circumstances should in principle be unified for the preparation of the consolidated

accordance with accounting principles generally accepted in Japan ( Japanese GAAP ), which are different infinancial statements. However, financial statements prepared by foreign subsidiaries in accordance withcertain respects as to application and disclosure requirements from International Financial Reporting Standards.

either International Financial Reporting Standards or generally accepted accounting principles in the
United States of America tentatively may be used for the consolidation process, except for the following

In preparing these consolidated financial statements, certain reclassifications and rearrangements have been

items that should be adjusted in the consolidation process so that net income is accounted for inmade to the consolidated financial statements issued domestically in order to present them in a form which isaccordance with Japanese GAAP, unless they are not material: (a) amortization of goodwill; (b) scheduled

more familiar to readers outside Japan. In addition, certain reclassifications have been made in the 2014 financial

amortization of actuarial gain or loss of pensions that has been directly recorded in equity; (c) expensing

statements to conform to the classifications used in 2015.

capitalized development costs of R&D; (d) cancellation of the fair value model of accounting for property,
plant and equipment and investment properties and incorporation of the cost model of accounting; and (e)The consolidated financial statements are stated in Japanese yen, the currency of the country in which Lawson,

exclusion of minority interests from net income, if contained in net income.

Inc. (the Company ) is incorporated and operates. The translations of Japanese yen amounts into U.S. dollar
amounts are included solely for the convenience of readers outside Japan and have been made at the rate ofc. Unification of Accounting Policies Applied to Foreign Associated Companies for the Equity¥119.27 to $1, the approximate rate of exchange at February 28, 2015. Such translations should not be construed

Method̶ In March 2008, the ASBJ issued ASBJ Statement No. 16, Accounting Standard for Equity

as representations that the Japanese yen amounts could be converted into U.S. dollars at that or any other rate.

Method of Accounting for Investments. The new standard requires adjustments to be made to conformthe associate s accounting policies for similar transactions and events under similar circumstances to those

Mitsubishi Corporation ( Mitsubishi ) owns 32,399 thousand shares of common stock of the Company (includingof the parent company when the associate s financial statements are used in applying the equity method,indirect holdings) as of February 28, 2015, which represent 32.4% of the total voting rights of the Company.

unless it is impracticable to determine adjustments. In addition, financial statements prepared by foreign

Accordingly, Mitsubishi is a principal shareholder.

associated companies in accordance with either International Financial Reporting Standards or thegenerally accepted accounting principles in the United States tentatively may be used in applying theequity method if the following items are adjusted so that net income is accounted for in accordance with

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESJapanese GAAP, unless they are not material: (a) amortization of goodwill; (b) scheduled amortization ofa. Consolidation ̶ The consolidated financial statements include the accounts of the Company and its fifteen

actuarial gain or loss of pensions that has been directly recorded in the equity; (c) expensing capitalized(twelve in 2014) subsidiaries (collectively, the Companies ). Consolidation of the remaining subsidiary would

development costs of R&D; (d) cancellation of the fair value model of accounting for property, plant, andnot have a material effect on the accompanying consolidated financial statements.

equipment and investment properties and incorporation of the cost model of accounting; and (e) exclusionof minority interests from net income, if contained in net income.

Under the control and influence concepts, those entities in which the Company, directly or indirectly, is able toexercise control over operations are fully consolidated, and those entities over which the Companies have theability to exercise significant influence are accounted for by the equity method.

d. Business Combination ̶ In October 2003, the Business Accounting Council issued a Statementof Opinion,

Accounting for Business Combinations, and in December 2005, the ASBJ issued

ASBJ Statement No. 7, Accounting Standard for Business Divestitures, and ASBJ Guidance No.
Investments in two (two in 2014) associated companies are accounted for by the equity method. Investments

10, Guidance for Accounting Standard for Business Combinations and Business Divestitures. The

in the remaining unconsolidated subsidiaries and associated companies are stated at cost. If the equity

accounting standard for business combinations allowed companies to apply the pooling-of-interests

method of accounting had been applied to the investments in these entities, the effect on the accompanying

method of accounting only when certain specific criteria are met such that the business combination is

consolidated financial statements would not be material.

essentially regarded as a uniting-of-interests. For business combinations that do not meet the uniting-ofinterests criteria, the business combination is considered to be an acquisition and the purchase method

All significant intercompany balances and transactions have been eliminated in consolidation. All materialof accounting is required. This standard also prescribes the accounting for combinations of entities under

unrealized profit included in assets resulting from transactions within the Companies is eliminated.

common control and for joint ventures.

The excess of the cost of the Company s investments in consolidated subsidiaries and associated companies

In December 2008, the ASBJ issued a revised accounting standard for business combinations, ASBJ

over the fair value of the net assets at the dates of acquisition is being amortized over a period not exceeding

Statement No. 21, Accounting Standard for Business Combinations. Major accounting changes under

20 years.

the revised accounting standard are as follows: (1) The revised standard requires accounting for businesscombinations only by the purchase method. As a result, the pooling of interests method of accounting

76b. Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated Financial

is no longer allowed. (2) The previous accounting standard required R&D costs to be charged to income

Statements ̶ In May 2006, the Accounting Standards Board of Japan (ASBJ) issued ASBJ Practicalas incurred. Under the revised standard, in-process research and development costs (IPR&D) acquired

Issues Task Force (PITF) No. 18, Practical Solution on Unification of Accounting Policies Applied to Foreignin the business combination are capitalized as an intangible asset. (3) The previous accounting standard

Lawson, Inc. Integrated Report 2015

Lawson, Inc. Integrated Report 201577

Financial Section

provided for a bargain purchase gain (negative goodwill) to be systematically amortized over a period not

h. Marketable and Investment Securities ̶ Marketable and investment securities are classified andexceeding 20 years. Under the revised standard, the acquirer recognizes the bargain purchase gain in

accounted for, depending on management s intent, as follows: (1) held-to-maturity debt securities, which

profit or loss immediately on the acquisition date after reassessing and confirming that all of the assets

are expected to be held to maturity with the positive intent and ability to hold to maturity are reported

acquired and all of the liabilities assumed have been identified after a review of the procedures used in theat amortized cost and (2) available-for-sale securities, which are not classified as the aforementioned

purchase price allocation. The revised standard was applicable to business combinations undertaken on

securities, are stated at fair value based on market quotation. Unrealized gains and losses, net ofor after April 1, 2010.

applicable taxes, are reported in a separate component of equity. The cost of securities sold is determinedbased on the moving-average method.

e. Franchise Agreement and Basis of Recognizing Franchise Commission̶ The Company operates
principally in a single industry commonly classified as the convenience store business with its own stores

Nonmarketable available-for-sale securities are stated at cost determined by the moving-average method.

and franchised stores. The Company allows each independent franchisee to operate relatively small-sized

For other than-temporary declines in fair value, nonmarketable available-for-sale securities are reduced toconvenience stores using specific designs and the LAWSON brand names, and provides related managerial

net realizable value by a charge to income.

or technical know-how under a franchise agreement. Under the agreement, all franchised stores are provided
with a variety of services and advice on the operation of convenience stores from the Company as thei. Property and Store Equipment̶ Property and store equipment are stated at cost except for land (seefranchisor. In return, such franchised stores are required to pay continuing franchise commissions to theNote 7). Depreciation is computed mainly by the straight-line method at rates based on the estimatedCompany based on certain percentages of the respective franchised store s gross margin. As the franchisor,

useful lives of the assets. The range of useful lives is principally from 10 to 34 years for buildings andthe Company accounts for franchise commissions on an accrual basis by reference to the gross margin

structures and from 5 to 8 years for furniture, fixtures, and equipment.

earned by each franchised store and the applicable commission percentage. According to the franchise
agreement, a franchised store may pay additional guarantee deposits equal to twice the average monthly

The useful lives for lease assets are the terms of the respective leases.

sales amounts of the respective store and pay a lower commission percentage.
j. Long Lived Assets̶ The Companies review their long-lived assets for impairment whenever events or
The term of a franchise agreement is effective primarily for 10 years from the commencement date of achanges in circumstance indicate the carrying amount of an asset or asset group, mainly by each store,

new store s operation as a franchised store, and may be extended or renewed upon expiration subject to

may not be recoverable. An impairment loss would be recognized if the carrying amount of an asset or

renegotiation of contract terms between the Company and the franchisee.

asset group exceeds the sum of the undiscounted future cash flows expected to result from the continued

The franchise agreement usually provides that the franchised store shall make a cash payment to theby which the carrying amount of the asset exceeds its recoverable amount, which is the higher of theCompany in the amount of ¥3 million upon commencement. Upon receipt of such payment, ¥1.5 million

discounted cash flows from the continued use and eventual disposition of the assets or the net sellingis credited to income of the Company as Operating revenues̶franchise commissions from franchised

price at disposition.

use and eventual disposition of the asset or asset group. The impairment loss is measured as the amountstores for services related to the opening of the LAWSON store. The remaining amount received by theCompany is credited to the Due to franchised stores account and then applied to working capital forpurchases of merchandise and supplies for the franchised store.
As part of the contractual obligations of the franchisor under the agreement, the Company generally
provides franchisees with furniture, fixtures, and equipment designed for the LAWSON stores. In somek. Software ̶ Software used by the Companies is amortized using the straight line method based on theestimated useful life (mainly five years).
l. Trademark right̶Trademark right is amortized using the straight line method based on the estimateduseful life (mainly twenty years).

cases, franchisees may also be provided with the land or buildings for the stores. However, the Company
does not require the franchisees to make lease payments related to the stores. Instead, a higher

m. Employees Retirement Benefits̶ The Company and a certain domestic subsidiary have defined benefit

percentage applicable to the gross margin would be used as the basis for determining the franchise

lump sum severance indemnity plans which cover substantially all of their employees. The Company

commissions. The portion of franchise commission attributable to property and store equipment leases isestablished a trust fund for its lump sum severance indemnity plan.

not separately accounted for by the Company.
The Companies account for the liability for retirement benefits based on projected benefit obligations
f. Cash and Cash Equivalents̶ Cash and cash equivalents include cash on hand, demand deposits, andand plan assets at the balance sheet date. Unrecognized prior service costs are amortized on a straight-

short-term investments, which mature or become due within three months of the date of acquisition andline method over 10 years, which is determined within the average remaining service periods for thewhich are readily convertible into cash and are exposed to insignificant risk of changes in value.

employees.
Unrecognized actuarial gains or losses are amortized on a straight-line method over 10 years, which isg. Inventories̶ Substantially all inventories are stated at the lower of cost, determined by the retailmethod as generally applied in the retail industry, or net selling value. Inventories of certain consolidated

determined to be within the average remaining service periods for the employees, from the following year
in which it occurs.

subsidiaries are stated at the lower of cost, determined by the gross-average method, or net selling value.
78

Lawson, Inc. Integrated Report 2015

Lawson, Inc. Integrated Report 201579

Financial Section

In May 2012, the ASBJ issued ASBJ Statement No. 26, Accounting Standard for Retirement Benefits

p. Stock Options̶ In December 2005, the ASBJ issued ASBJ Statement No. 8, Accounting Standard

and ASBJ Guidance No. 25, Guidance on Accounting Standard for Retirement Benefits, which replacedfor Stock Options, and related guidance. The standard and guidance are applicable to stock options

the accounting standard for retirement benefits that had been issued by the Business Accounting Council

granted on and after May 1, 2006. This standard requires companies to measure the cost of employee

in 1998 with an effective date of April 1, 2000, and the other related practical guidance, and were followed

stock options based on the fair value at the date of grant and recognize compensation expense over theby partial amendments from time to time through 2009.

vesting period as consideration for receiving goods or services. The standard also requires companies toaccount for stock options granted to non-employees based on the fair value of either the stock option or(1) Under the revised accounting standard, actuarial gains and losses and past service costs that are

the goods or services received. In the balance sheet, the stock option is presented as a stock acquisition

yet to be recognized in profit or loss are recognized within equity (accumulated other comprehensive

right in a separate component of equity until exercised. The standard covers equity-settled, share-based

income), after adjusting for tax effects, and any resulting deficit or surplus is recognized as a liability

payment transactions, but does not cover cash-settled, share-based payment transactions. In addition,(liability for retirement benefits) or asset (asset for retirement benefits).

the standard allows unlisted companies to measure options at their intrinsic value if they cannot reliably
estimate fair value.

(2) The revised accounting standard does not change how to recognize actuarial gains and losses andpast service costs in profit or loss. Those amounts are recognized in profit or loss over a certain period

q. Leases̶ In March 2007, the ASBJ issued ASBJ Statement No. 13, Accounting Standard for Leaseno longer than the expected average remaining service period of the employees. However, actuarial

Transactions, which revised the previous accounting standard for lease transactions. The revised

gains and losses and past service costs that arose in the current period and have not yet beenaccounting standard for lease transactions was effective for fiscal years beginning on or after April 1,

recognized in profit or loss are included in other comprehensive income and actuarial gains and losses

2008.

and past service costs that were recognized in other comprehensive income in prior periods and thenrecognized in profit or loss in the current period shall be treated as reclassification adjustments.

Under the previous accounting standard, finance leases that were deemed to transfer ownership ofthe leased property to the lessee were capitalized. However, other finance leases were permitted to be

The Company applied the revised accounting standard and guidance for retirement benefits for (1) and (2)accounted for as operating lease transactions if certain

as if capitalized information was disclosed

above, effective February 28, 2015. As a result, liability for retirement benefits of ¥12,959 million ($108,653

in the notes to the lessee s financial statements. The revised accounting standard requires that all

thousand) were recorded as of February 28, 2015, and accumulated other comprehensive income for thefinance lease transactions be capitalized to recognize lease assets and lease obligations in the balanceyear ended February 28, 2015, decreased by ¥519 million ($4,351 thousand).

sheet. In addition, the accounting standard permits leases that existed at the transition date and which
do not transfer ownership of the leased property to the lessee to be accounted for as operating leasen. Allowance for Retirement Benefits to Executive Officers and Audit and Supervisory Board

transactions.

Members̶ The provisions are calculated as a liability at 100% of the amount that would be required if all
executive officers and audit and supervisory board members resigned as of each balance sheet date.

The Companies applied the revised accounting standard effective March 1, 2009. In addition, theCompanies continue to account for leases that existed at the transition date and which do not transfer

o. Asset Retirement Obligations ̶ In March 2008, the ASBJ issued ASBJ Statement No. 18,

ownership of the leased property to the lessee as operating lease transactions.

Accounting Standard for Asset Retirement Obligations, and ASBJ Guidance No. 21, Guidance on
Accounting Standard for Asset Retirement Obligations. Under this accounting standard, an asset

All other leases are accounted for as operating leases.

retirement obligation is defined as a legal obligation imposed either by law or contract that results fromthe acquisition, construction, development, and the normal operation of a tangible fixed asset and isr. Income Taxes̶ The Companies provide for income taxes applicable to all items included in theassociated with the retirement of such tangible fixed asset.

consolidated statement of income regardless of when such taxes are payable. Deferred income taxes

The asset retirement obligation is recognized as the sum of the discounted cash flows required for thefinancial reporting purposes and such amounts recognized for tax purposes. These deferred taxes are

future asset retirement and is recorded in the period in which the obligation is incurred if a reasonablemeasured by applying currently income tax rates to the temporary differences.

are recorded to reflect the impact of temporary differences between assets and liabilities recognized for

estimate can be made. If a reasonable estimate of the asset retirement obligation cannot be made in the
period the asset retirement obligation is incurred, the liability should be recognized when a reasonable

s. Foreign Currency Financial Statements̶ The balance sheet accounts of an associated company

estimate of asset retirement obligation can be made. Upon initial recognition of a liability for an asset

denominated in foreign currencies are translated into Japanese yen at the current exchange rate as ofretirement obligation, an asset retirement cost is capitalized by increasing the carrying amount of thethe balance sheet date except for equity, which is translated at the historical rate. Differences arising from

related fixed asset by the amount of the liability. The asset retirement cost is subsequently allocated tosuch translation are shown as Foreign currency translation adjustments and Minority interests in a

expense through depreciation over the remaining useful life of the asset. Over time, the liability is accreted

separate component of equity. Revenue and expense accounts of an affiliated company denominated in

to its present value each period. Any subsequent revisions to the timing or the amount of the original

foreign currencies are translated into yen at the current exchange rate.

estimate of undiscounted cash flows are reflected as an adjustment to the carrying amount of the liability
and the capitalized amount of the related asset retirement cost.
80

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Financial Sectiont. Per Share Information̶ Basic net income per share is computed by dividing net income available to

The Company has reclassified Foreign exchange gains and Loss on cancellation of leases in the Other

common shareholders by the weighted-average number of common shares outstanding for the period.

(Expenses) Income section of the consolidated income statement for the year ended February 28, 2015.
The amounts previously included in other-net as of February 28, 2014 were ¥272 million and ¥(571) million,

The number of shares used in computing net income per share was 99,931 thousand shares for 2015

respectively.

and 99,898 thousand shares for 2014.
The Company has reclassified Equity in earnings of associated companies and Decrease in claims in
Diluted net income per share for the years ended February 28, 2015 and 2014, is computed by using thebankruptcy and reorganization in the Operating Activities section of the consolidated cash flows statement forweighted average number of common shares outstanding adjusted to include the potentially dilutive effectthe year ended February 28, 2014, to Other-net among the Operating activities section of the consolidatedof stock options that were outstanding during the year.

cash flows statement for the year ended February 28, 2015. The amounts included in other-net as ofFebruary 28, 2014 were ¥(119) million and ¥123 million, respectively.

Cash dividends per share presented in the accompanying consolidated statement of income are dividends
applicable to the respective years including dividends to be paid after the end of the year.

The Company has reclassified Purchase of investment securities in the Investing Activities section of theconsolidated cash flows statement for the year ended February 28, 2015. The amount previously included inu. Accounting Changes and Error Corrections̶ In December 2009, the ASBJ issued ASBJ Statement

other-net as of February 28, 2014 was ¥(45) million.

No. 24, Accounting Standard for Accounting Changes and Error Corrections and ASBJ Guidance No.
24, Guidance on Accounting Standard for Accounting Changes and Error Corrections. Accounting
treatments under this standard and guidance are as follows:

w. New Accounting Pronouncements

Accounting Standard for Retirement Benefits ̶ On May 17, 2012, the ASBJ issued ASBJ Statement No.
26 Accounting Standard for Retirement Benefits and ASBJ Guidance No. 25, Guidance on Accounting(1) Changes in accounting policies

Standard for Retirement Benefits, which replaced the Accounting Standard for Retirement Benefits that had

When a new accounting policy is applied following the revision of an accounting standard, the new

been issued by the Business Accounting Council in 1998 with an effective date of April 1, 2000, and the otherpolicy is applied retrospectively unless the revised accounting standard includes specific transitional

related practical guidances, and followed by partial amendments from time to time through 2009.

provisions, in which case the entity shall comply with the specific transitional provisions.
Major changes are as follows:(2) Changes in presentation
When the presentation of financial statements is changed, prior-period financial statements arereclassified in accordance with the new presentation.

(1) Outline
Based on the viewpoint of improving financial reporting and international movement, amendments
were made with a focus on the methods of processing unrecognized actuarial differences and(3) Changes in accounting estimates
A change in an accounting estimate is accounted for in the period of the change if the change affects

unrecognized prior service costs, the methods of calculating retirement benefit obligations and service
costs, and the expansion of disclosure.

that period only, and is accounted for prospectively if the change affects both the period of thechange and future periods.

(2) Expected adoption date
The revised methods of calculating the retirement benefit obligations and service costs will be(4) Corrections of prior-period errors

adopted from the beginning of the fiscal period ending February 28, 2016.

When an error in prior-period financial statements is discovered, those statements are restated.
(3) Effect of application of the standards
v. Reclassification of Prior Year s Consolidated Financial Statements̶ The Company has made changes

The effects of applying the revised accounting standard above for the year ending February 28, 2016

to the classification of amounts in the consolidated balance sheet, consolidated income statement andare expected to be a increase of beginning of retained earnings by ¥1,411 million ($11,830 thousand).

the consolidated cash flows statement for the year ended February 28, 2015. In order to conform with the

The effect of this change in the consolidated statement of income is expected to be immaterial.

presentation for the year ended February 28, 2015, the Company has reclassified the related amounts in the
consolidated balance sheet, the consolidated income statement and the consolidated cash flows statement

Accounting Standards for Business Combinations and Consolidated Financial Statements ̶ In

for the year ended February 28, 2014, respectively, as stated below.

September, 2013, the ASBJ issued revised ASBJ Statement No. 21, "Accounting Standard for Business
Combinations," revised ASBJ Guidance No. 10, "Guidance on Accounting Standards for Business

The Company has reclassified Trademark right in the Investments and other assets section of the

Combinations and Business Divestitures," and revised ASBJ Statement No. 22, "Accounting Standard forconsolidated balance sheet for the year ended February 28, 2015. The amount previously included in other

Consolidated Financial Statements." Major accounting changes are as follows:

as of February 28, 2014 was ¥106 million.
(a) Transactions with noncontrolling interest - A parent's ownership interest in a subsidiary might change if the82

Lawson, Inc. Integrated Report 2015

Lawson, Inc. Integrated Report 201583

Financial Section

parent purchases or sells ownership interests in its subsidiary. The carrying amount of minority interest isapplication of the revised standards and guidance, the accumulated effects of retrospective adjustments foradjusted to reflect the change in the parent's ownership interest in its subsidiary while the parent retains

all (a) transactions with noncontrolling interest and (e) acquisition-related costs which occurred in the pastits controlling interest in its subsidiary. Under the current accounting standard, any difference between theshall be reflected as adjustments to the beginning balance of capital surplus and retained earnings for thefair value of the consideration received or paid and the amount by which the minority interest is adjusted

year of the first-time application. In prospective application, the new standards and guidance shall be appliedis accounted for as an adjustment of goodwill or as profit or loss in the consolidated statement of income.

prospectively from the beginning of the year of the first-time application.

Under the revised accounting standard, such difference shall be accounted for as capital surplus as long as
the parent retains control over its subsidiary.

The revised accounting standards and guidance for (b) presentation of the consolidated balance sheet and(c) presentation of the consolidated statement of income shall be applied to all periods presented in financial(b) Presentation of the consolidated balance sheet - In the consolidated balance sheet, "minority interest"

statements containing the first-time application of the revised standards and guidance.

under the current accounting standard will be changed to "noncontrolling interest" under the revised
accounting standard.

The revised standards and guidance for (d) provisional accounting treatments for a business combination are
effective for a business combination which occurs on or after the beginning of annual periods beginning on(c) Presentation of the consolidated statement of income - In the consolidated statement of income, "income
before minority interest" under the current accounting standard will be changed to "net income" under theor after April 1, 2015. Earlier application is permitted for a business combination which occurs on or after the
beginning of annual periods beginning on or after April 1, 2014.

revised accounting standard, and "net income" under the current accounting standard will be changed to"net income attributable to owners of the parent" under the revised accounting standard.

The Company expects to apply the revised accounting standards and guidance for (a), (b), (c) and (e) abovefrom March 1, 2016, and for (d) above for a business combination which will occur on or after March 1, 2016,(d) Provisional accounting treatments for a business combination - If the initial accounting for a businesscombination is incomplete by the end of the reporting period in which the business combination occurs, an

and is in the process of measuring the effects of applying the revised accounting standards and guidance infuture applicable periods.

acquirer shall report in its financial statements provisional amounts for the items for which the accounting
is incomplete. Under the current accounting standard guidance, the impact of adjustments to provisionalamounts recorded in a business combination on profit or loss is recognized as profit or loss in the year
in which the measurement is completed. Under the revised accounting standard guidance, during the

3 CHANGES IN ACCOUNTING POLICIES
Changes in accounting policies which are not easily distinguished from changes in accounting estimatesmeasurement period, which shall not exceed one year from the acquisition, the acquirer shall retrospectively
adjust the provisional amounts recognized at the acquisition date to reflect new information obtained

Depreciation method of property and store equipment

about facts and circumstances that existed as of the acquisition date and that would have affected the

The Company and domestic consolidated subsidiaries changed the depreciation method for property andmeasurement of the amounts recognized as of that date. Such adjustments shall be recognized as if thestore equipment (excluding lease assets) from the declining-balance method to the straight-line method which

accounting for the business combination had been completed at the acquisition date.

has been adopted primarily from the current fiscal year.

(e) Acquisition-related costs - Acquisition-related costs are costs, such as advisory fees or professional fees,

The Companies, under the policy of placing emphasis on existing stores, reviewed the depreciation method

which an acquirer incurs to effect a business combination. Under the current accounting standard, theof its property and store equipment upon the adoption of a strategy to reinforce the competitiveness of its

acquirer accounts for acquisition-related costs by including them in the acquisition costs of the investment.

existing stores, which includes the utilization of membership card data and the restructuring of the Companies.

Under the revised accounting standard, acquisition-related costs shall be accounted for as expenses in the

As a result, the depreciation method was changed to the straight-line method from the current consolidated

periods in which the costs are incurred.

fiscal year because an even distribution of depreciation is considered to be more appropriate going forward
since it is anticipated that the number of visiting customers, which is proportionate to equipment utilization (theThe above accounting standards and guidance for (a) transactions with noncontrolling interest, (b)main factor behind economic depreciation), will be maintained as store assets age.

presentation of the consolidated balance sheet, (c) presentation of the consolidated statement of income,and (e) acquisition-related costs are effective for the beginning of annual periods beginning on or after April

The effects of this change compared to the previous method are an increase of ¥9,422 million ($78,997

1, 2015. Earlier application is permitted from the beginning of annual periods beginning on or after April 1,

thousand) in operating income and income before income taxes and minority interests for the fiscal year ended

2014, except for (b) presentation of the consolidated balance sheet and (c) presentation of the consolidated

February 28, 2015.

statement of income. In the case of earlier application, all accounting standards and guidance above, except
for (b) presentation of the consolidated balance sheet and (c) presentation of the consolidated statement of

The effects on segment information are stated in the relevant sections.

income, should be applied simultaneously.
Either retrospective or prospective application of the revised accounting standards and guidance for (a)transactions with noncontrolling interest and (e) acquisition-related costs is permitted. In retrospective
84

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Lawson, Inc. Integrated Report 201585

Financial Section

4 ACCOUNTS RECEIVABLE̶DUE FROM FRANCHISED STORES
Under the franchise agreement, the Company is responsible for providing architectural and design services

5 MARKETABLE AND INVESTMENT SECURITIESMarketable and investment securities as of February 28, 2015 and 2014, consisted of the following:with respect to the franchised stores facilities, for training of the franchisees personnel, and for the2015

amounts payable to such vendors.
Non-current̶ Marketable and other equity securities

The EDP system of the Company generates a record of merchandise purchased by each franchised store andThousands of
U.S. Dollars

Millions of Yen

centralized processing of invoices from suggested vendors of merchandise and subsequent payments of¥8,101

Non-current̶ Corporate bonds

2015

2014

$67,921¥2,276

233

1,954

accumulates the amounts payable to respective vendors. Under the franchise agreement, the Company, as arepresentative for all franchised stores, pays amounts payable to the vendors on the stores behalf. When the

The costs and aggregate fair values of marketable and investment securities as of February 28, 2015 andmerchandise is received by each franchised store, the Company records the cost of the merchandise in the2014, were as follows:

Accounts receivable̶due from franchised stores account since such costs shall be subsequently recovered

Millions of Yen

from the respective franchised stores.
February 28, 2015

The Accounts receivable̶due from franchised stores account represents net amounts recoverable from the

Securities classified as available-for-sale̶ Equity securities

Unrealized
Gains

Cost

Unrealized
Losses

6,355

¥ 780

Fair Value¥5,575franchised stores.
Millions of Yen
Unrealized
Gains

February 28, 2014

Cost

Securities classified as available-for-sale̶ Equity securities¥1,128

Unrealized
LossesFair Value

¥211

¥917

Thousands of U.S. Dollars
Unrealized
Gains

February 28, 2015

Cost

Securities classified as available-for-sale̶ Equity securities$53,283

Unrealized
Losses$6,540Fair Value$46,743

The proceeds, realized gains and realized losses of the available-for-sale securities which were sold during theyears ended February 28, 2015 and 2014, were as follows:
Millions of Yen
February 28, 2015

Realized
Gain

Proceeds

Available-for-sale:
Equity securities¥369

Realized
Loss

¥369

Millions of Yen
February 28, 2014

Realized
Gain

Proceeds

Available-for-sale:
Equity securities¥494

Realized
Loss

¥403

Thousands of U.S. Dollars
February 28, 2015

Available-for-sale:
Equity securities

86

Lawson, Inc. Integrated Report 2015

Realized
Gain

Proceeds$3,094

RealizedLoss$3,094

Lawson, Inc. Integrated Report 201587

Financial Section

6 LONG LIVED ASSETS

7 LAND REVALUATIONThe Companies mainly identify each store as the smallest cash generating unit. The Companies recognize

Under the Law of Land Revaluation, promulgated on March 31, 1998 and revised on March 31, 1999 andan impairment loss in the case where the value of long-lived assets has declined, primarily as a result of

2001, the Company chose a one-time revaluation of its own-use land to a value based on real estate appraisal

continuous operating losses. The carrying amounts of those assets are written down to the recoverable

information as of February 28, 2002.

amounts and an impairment loss is recorded in other expenses in the consolidated statement of income.
The resulting land revaluation difference represents unrealized depreciation of land and is stated, net of income
The Companies recognized an impairment loss in the following asset categories for the years ended February

taxes, as a component of equity. There was no effect on the consolidated statements of income. Continuous

28, 2015 and 2014:

readjustment is not permitted unless the land value subsequently declines significantly.
Thousands of
U.S. Dollars

Millions of Yen
Category

Stores

Other

Related Assets

Location

Buildings andFurniture, fixtures,and equipment

Tokyo

2015
¥1,308¥729

market value by ¥314 million ($2,633 thousand).

771

598

6,464

Others

4,240

2,566

35,550

29

243

17

Goodwill

1,898

143

1236

15,913Other

7¥8,263¥5,744

consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

2015

Accounts payable̶trade as of February 28, 2015 and 2014, was summarized below:
Thousands of
U.S. Dollars

Millions of Yen

Accounts payable̶trade for franchised stores

2015

2014

2015

¥83,386¥79,444$699,136

Accounts payable̶trade for the Company-operated stores
Total

20,073

9,727

168,299¥103,459¥89,171$867,435

2015

2014

9 ACCOUNTS PAYABLE̶DUE TO FRANCHISED STORES¥3,659¥2,868$30,678

464

359

3,890

The cost of merchandise supplied to franchised stores is recorded as

2,172

1,251

18,212franchised stores as described in Note 4.

29

243

Goodwill

1,898

15,913

Software

17

1,236

143

Other

24

30

201

Total

¥8,263¥5,744$69,280Land

payments to vendors (see Note 4).

$69,280

The above noted assets, which incurred impairment losses for the years ended February 28, 2015 and 2014,

Lease assets

The balances of Accounts payable̶trade represent the amounts payable to vendors for merchandisepurchasing procedures both for the Company-operated stores and franchised stores and makes collective

608

SoftwareFurniture, fixtures, and equipment

8 ACCOUNTS PAYABLE̶TRADE
purchased by the Company-operated stores and franchised stores. The Company centralizes all merchandise

Buildings andFurniture, fixtures,and equipment

Buildings

As at February 28, 2015, the carrying amount of the land after the above one-time revaluation exceeded the$10,967

Osaka

Land

Total

2015

2014

Accounts receivable̶due fromAll franchised stores make remittances of cash proceeds from daily sales to the Company. In certain instances,
the remittance from a franchised store exceeds the balance of Accounts receivable̶due from franchised
stores. In the accompanying consolidated balance sheets, such excess balances are presented as Accounts
payable̶due to franchised stores.

The recoverable amount of these assets was measured based on net selling price or value in use. The net
selling price of land was calculated based on the appraised value by a real estate appraiser or an expected
contract price. The value in use was calculated by discounting estimated future cash flows. The discount rateused was mainly 4.8% and 4.3% for the years ended February 28, 2015 and 2014, respectively.

88

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Lawson, Inc. Integrated Report 201589

Financial Section

10 SHORT-TERM BANK LOANS AND LONG TERM DEBTAs of February 28, 2015, the carrying amounts of assets pledged as collateral for short-term bank loans andthe current portion of long-term debt of ¥1,575 million ($13,205 thousand) and long-term debt of ¥8,425

Short-term bank loans at February 28, 2015 and 2014, consisted of notes to banks.

million ($70,638 thousand), respectively, were as follows:
The annual interest rates applicable to the short-term bank loans were 0.33% and 0.05% at February 28,
2015 and 2014, respectively.

Year Ending February 28 or 29

Thousands of
U.S. Dollars

Millions of Yen

Loans from banks, due serially to 2019with a weighted-average interest rate of 0.26% (2015)

2015

2014

¥59,000

2015

2015
¥416

$3,488

Shares of consolidated subsidiaries(Amount before elimination)

16,615

139,306

Total¥17,031$142,794$494,676

Obligations under finance leases

96,122¥78,253805,920

Less current portion(20,523)(16,586)(172,072)¥134,599¥61,667$1,128,524

Long-term debt, less current portion

Thousands of
U.S. Dollars

Cash and cash equivalents

Long-term debt at February 28, 2015 and 2014, consisted of the following:

2015

Millions of Yen

11 EMPLOYEES' RETIREMENT BENEFITSFor employees' retirement benefits, the Company and some consolidated subsidiaries adopt a funded defined
benefit type lump-sum retirement allowance plan and a defined contribution type pension plan.

The aggregate annual maturities of the current portion of long-term debt and long-term debt, excluding

The lump-sum retirement allowance plan (unfunded, but some are funded as a result of setting an employee

finance leases, at February 28, 2015, were as follows:

pension trust) pays a lump sum as a retirement benefit based on salary and length of service of the employee.

Year Ending February 28 or 29

Millions of Yen

Thousands of
U.S. Dollars

2016

¥575

$4,821

2017

575

4,821

2018

575

4,821

2019

575

4,821

2020

56,700475,392

Total¥59,000$494,676

The lump-sum retirement allowance plan employed by some consolidated subsidiaries calculates liabilities
related to retirement benefits and retirement benefit expenses by the simplified method.
Year Ended February 28, 2015
(1) The changes in defined benefit obligation for the year ended February 28, 2015, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

Balance at beginning of year

The aggregate annual maturities of finance lease obligations at February 28, 2015, were as follows:Year Ending February 28 or 29

Millions of Yen

Thousands of
U.S. Dollars¥17,417$146,030

1,405

11,780209

1,752

Current service cost
Interest cost2016

¥19,948$167,251

Actuarial losses

86

721

2017

18,558

155,597

Benefits paid

(804)

(6,741)

2018

16,791

140,7812019

14,217

119,200

2020 and thereafter

26,608223,090

Total¥96,122$805,919

OthersBalance at end of year

35

294

¥18,348$153,836(2) The changes in plan assets for the year ended February 28, 2015, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

Balance at beginning of year
Actuarial gains
Balance at end of year90

Lawson, Inc. Integrated Report 2015

¥5,588$46,8521

8¥5,589$46,860

Lawson, Inc. Integrated Report 201591

Financial Section(3) Reconciliation between the liability recorded in the consolidated balance sheet and the balances of definedb. Method of determining the expected rate of return on plan assets

benefit obligation and plan assets

The expected rate of return on plan assets is determined considering the long-term rates of return which are
Thousands of
U.S. Dollars

Millions of Yen

Funded defined benefit obligation
Plan assets
Unfunded defined benefit obligation
Net liability arising from defined benefit obligation¥17,053$142,978(5,589)(46,860)

11,464

96,118

1,295

721¥12,759$96,839

expected currently and in the future from the various components of the plan assets.
(7) Assumptions used for the year ended February 28, 2015, were set forth as follows:
Discount rate

1.2% (mainly)

Expected rate of return on plan assets0%(8) Contributions to the defined contribution pension plan for the year ended February 28, 2015,
was as follows:

Thousands of
U.S. Dollars

Millions of Yen

Liability for retirement benefits¥12,759$96,839

Net liability arising from defined benefit obligation¥12,759$96,839(4) The components of net periodic benefit costs for the year ended February 28, 2015, were as follows:

Periodic benefit costThousands of
U.S. Dollars¥331$2,775

Year Ended February 28, 2014

Thousands of
U.S. Dollars

Millions of Yen

Millions of Yen

The liability (asset) for retirement benefits at February 28, 2014, consisted of the following:

Service cost

¥1,405$11,780

Interest cost

209

1,752

Recognized actuarial losses

114

956

Projected benefit obligation¥17,416

Fair value of plan assets(5,588)

Amortization of prior service cost

5

42

Others(9)(75)¥1,724$14,455

Net periodic benefit costs(5) Accumulated other comprehensive income on defined retirement benefit plans as of February 28, 2015
Millions of Yen

Millions of Yen

Unrecognized actuarial gain (loss)(745)

Net liability (asset)¥11,083

The components of net periodic benefit costs for the year ended February 28, 2014, are as follows:

Thousands of
U.S. Dollars

Millions of Yen

Unrecognized prior service cost

¥29

$243

Service cost

¥1,383

Unrecognized actuarial losses

712

5,970

Interest cost

200

Total

¥741

$6,213

Amortization of prior service cost

179

Recognized actuarial loss

136

Contribution to defined contribution plan

(6) Plan assets

295

Net periodic benefit costs

a. Components of plan assets¥2,193

Plan assets consisted of the following:

92

Cash and cash equivalents

100%

Assumptions used for the year ended February 28, 2014, are set forth as follows:

Total

100%

Discount rate

Lawson, Inc. Integrated Report 2015

1.2% (mainly)

Expected rate of return on plan assets

0%

Amortization period of prior service cost

10 years

Recognition period of actuarial gain/loss

10 years

Lawson, Inc. Integrated Report 201593

Financial Section

12 ASSET RETIREMENT OBLIGATIONS

capital, other capital surplus, and retained earnings can be transferred among the accounts under certain

The changes in asset retirement obligations for the years ended February 28, 2015 and 2014, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

conditions upon resolution of the shareholders.
c. Treasury Stock and Treasury Stock Acquisition Rights

2015

2014

2015

The Companies Act also provides for companies to purchase treasury stock and dispose of such treasury¥17,885¥16,791$149,954

stock by resolution of the Board of Directors. The amount of treasury stock purchased cannot exceed

1,711

1,373

14,345Reconciliation associated with passage of time

343

321

2,876

Reduction associated with settlement ofasset retirement obligations

(832)

(600)

(6,976)

21,552

17,885

180,699

(22)

(10)

(184)

¥21,530¥17,875$180,515

Balance at beginning of year
Additional provisions associated with the acquisition of property,
plant, and equipment

Other
Total
Less current portion
Asset retirement obligations, less current portion

2,445

20,500the amount available for distribution to the shareholders which is determined by a specific formula. Under
the Companies Act, stock acquisition rights are presented as a separate component of equity. The
Companies Act also provides that companies can purchase both treasury stock acquisition rights andtreasury stock. Such treasury stock acquisition rights are presented as a separate component of equity or
deducted directly from stock acquisition rights.

14 STOCK OPTIONSThe Company has stock option plans as an incentive for directors, executive officers, and selected employees.
The stock options outstanding as of February 28, 2015, are as follows:

13 EQUITY

ExercisePrice

22,400 shares2005.10.12¥1($0.01)

From October 13,
2005 to May 31, 2025

9 directors

21,300 shares2006.10.26¥1($0.01)

From October 27,
2006 to May 26, 2026

7th (a) Stock
Option7 directors

18,000 shares2007.9.5¥1($0.01)

From September 6,
2007 to August 20, 2027

8th (a) Stock
Option7 directors

26,400 shares2009.1.16¥1($0.01)

From January 17,
2009 to December 15, 2028

9th Stock
Option7 directors

21,500 shares2010.2.17¥1($0.01)

From February 18,
2010 to February 1, 2030

10th Stock
Option7 directors

18,900 shares2011.2.25¥1($0.01)

From February 26,
2011 to February 10, 2031

incorporation.

11th Stock
Option7 directors

27,000 shares2012.2.17¥1($0.01)

From February 18,
2012 to February 1, 2032

The Companies Act permits companies to distribute dividends-in-kind (noncash assets) to shareholders

12th Stock
Option7 directors

26,900 shares2013.4.12¥1($0.01)

From April 12,2013 to March 26, 2033

13th Stock
Option7 directors

25,400 shares2014.4.10¥1($0.01)

From April 10,2014 to March 23, 2034

provisions in the Companies Act that affect financial and accounting matters are summarized below:
a. Dividends
Under the Companies Act, companies can pay dividends at any time during the fiscal year in addition to
the year-end dividend upon resolution at the shareholders meeting. For companies that meet certain
criteria such as (1) having a Board of Directors, (2) having independent auditors, (3) having an Audit &Supervisory Board, and (4) the term of service of the directors is prescribed as one year rather than two
years of normal term by its articles of incorporation, the Board of Directors may declare dividends (except
for dividends in kind) at any time during the fiscal year if the company has prescribed so in its articles ofsubject to a certain limitation and additional requirements.

Persons Granted

Number of
Options Granted

Date of Grant

Japanese companies are subject to the Companies Act of Japan (the Companies Act ). The significant

Stock Option

5th Stock
Option9 directors

6th (a) Stock
OptionExercise Period

Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if
the articles of incorporation of the company so stipulate. The Companies Act provides certain limitations
on the amounts available for dividends or the purchase of treasury stock. The limitation is defined as theamount available for distribution to the shareholders, but the amount of net assets after dividends must be
maintained at no less than ¥3 million.
b. Increases/Decreases and Transfer of Common Stock, Reserve, and Surplus
The Companies Act requires that an amount equal to 10% of dividends must be appropriated as alegal reserve (a component of retained earnings) or as additional paid-in capital (a component of capitalsurplus) depending on the equity account charged upon the payment of such dividends until the total of
aggregate amount of legal reserve and additional paid-in capital equals 25% of the common stock. Under
the Companies Act, the total amount of additional paid-in capital and legal reserve may be reversed
without limitation. The Companies Act also provides that common stock, legal reserve, additional paid-in
94

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Financial Section

15 INCOME TAXESThe stock option activity is as follows:
5th
Stock
Option6th (a)Stock
Option7th (a)Stock
Option8th (a)Stock
Option9th
Stock
Option10th
Stock
Option11th
Stock
Option12th
Stock
Option13th
Stock
OptionYear Ended February 28, 2014

The Company and its domestic subsidiaries are subject to a number of different taxes based on income,which in the aggregate, resulted in a normal statutory tax rate of approximately 38.0% and 38.0% for theyears ended February 28, 2015, and 2014.

Non-vested
February 28, 2013̶Outstanding

The tax effects of significant temporary differences and tax loss carryforwards, which resulted in deferred tax

26,900Grantedassets and liabilities at February 28, 2015 and 2014, are as follows:

Canceled

26,900

Vested

2015

2014

2015

¥1,063¥1,254$8,913

Deferred tax assets:

VestedFebruary 28, 2013̶Outstanding

Thousands of
U.S. Dollars

Millions of Yen

February 28, 2014̶Outstanding

15,00021,30018,00026,40021,50018,90027,000Accrued enterprise taxes
26,900

VestedAccrued employees' bonuses

1,031

880

8,644

Excess of depreciation

14,83912,164

124,415

348

808

2,918

Employees' retirement benefits

6,584

6,018

55,202

Year Ended February 28, 2015

Allowance for doubtful accounts

1,011

1,055

8,477

Non-vested

Impairment loss

3,560

3,072

29,848February 28, 2014̶Outstanding

Tax loss carryforwards

13,5207,261

113,356

Exercised
Canceled
February 28, 2014̶Outstanding

15,00021,30018,00026,40021,50018,90027,000

Excess of amortization of software

26,90025,400GrantedCanceled

Less valuation allowance
25,400

VestedFebruary 28, 2015̶Outstanding

Net deferred tax assets
15,00021,30018,00026,40021,50018,90027,00026,900

11,20011,40011,40017,20015,20013,00019,90018,40018,100

3,800

9,900

6,600

9,200

6,300

5,900

7,100

8,500

7,300

VestedExercised

25,400Canceled
February 28, 2015̶Outstanding
Exercise price
Average stock price at exercise
Fair value price at grant date

Total
Deferred tax liabilities̶Trademark right

VestedFebruary 28, 2014̶Outstanding

Other

7,578

3,190

63,537(13,759)(9,593)(115,360)

35,775

26,109299,950

4,223¥31,552

35,407¥26,109$264,543

A reconciliation between the normal effective statutory tax rates and the actual effective tax rates reflected in
the accompanying consolidated statement of income for the year ended February 28, 2015, is as follows:
2015

2014

Normal effective statutory tax rate

38.0%

-

¥1

¥1

¥1

¥1

¥1

¥1

¥1

¥1

¥1

Change in valuation allowance

1.9-($0.01)($0.01)($0.01)($0.01)($0.01)($0.01)($0.01)($0.01)($0.01)

Expenses not deductible for income tax purposes

0.4-¥7,690¥7,696¥7,697¥7,698¥7,698¥7,698¥7,698¥7,774¥7,765Per-capita inhabitant tax($64.53)($64.53)($64.54)($64.54)($64.54)($64.54)($65.18)($65.10)0.5-($64.48)¥3,178¥2,852¥3,477¥2,652¥2,689¥3,339¥5,516¥5,146

Difference in tax rates of foreign consolidated subsidiaries

1.3-($26.65)($23.91)($29.15)($22.24)($22.55)($28.00)($46.25)($43.15)

Reduction of ending deferred tax balance due to change instatutory tax rate

1.1-

Amortization of goodwill

0.9-

Impairment loss of goodwill

1.2-

The assumptions used to measure the fair value of the 13th stock option (2015) were as follows:
13th Stock Option
Estimate method

Black-Scholes option pricing model

Effect of net operating loss carried forward
resulting from liquidation of consolidated subsidiaries

(1.4)

-

Volatility of stock price24.10%

Other̶net

(0.6)

-

Estimated remaining outstanding period

10 years

Actual effective tax rate

43.3%

-

Estimated dividend¥210 per share

Risk-free interest rate

0.60%

For the year ended February 28, 2014, the reconciliation is not disclosed because the difference is less than
5% of the normal effective statutory tax rate.

96

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Financial Section

New tax reform laws enacted in 2014 in Japan changed the normal effective statutory tax rate for the fiscal
year beginning on or after April 1, 2014. As a result, the normal effective statutory tax rate to recognize
deferred tax assets and liabilities for the expected future tax consequences of temporary differences in the

16 SUPPLEMENTAL INFORMATION FOR CASH FLOWS(1) Finance lease assets and finance lease obligations regarded as noncash transactions incurred for the year
ended February 28, 2015, amounted to ¥33,682 million ($282,401 thousand).

fiscal years beginning on or after March 1, 2015, changed from 38.0% to 35.6%. The effect of this change is(2) Breakdown of assets and liabilities of a newly consolidated subsidiaries acquired through purchase ofimmaterial.

shares in this consolidated fiscal year.
New tax reform laws enacted in 2015 in Japan changed the normal effective statutory tax rate for the fiscal
year beginning on or after April 1, 2015, to approximately 35.6% and for the fiscal year beginning on or after

The following is a breakdown of assets and liabilities at the time SEIJO ISHII Co., Ltd. was newly consolidated

April 1, 2016, to approximately 32.3%. The effect of these changes was to decrease deferred tax assets, net

through purchase of shares, and the difference between the cost of purchase of SEIJO ISHII Co., Ltd. sharesof deferred tax liabilities, by ¥2,198 million ($18,429 thousand) and to increase income taxes̶deferred in theand proceeds from the purchase.

consolidated statement of income for the year then ended by ¥2,156 million ($18,077 thousand).
At February 28, 2015, certain domestic subsidiaries have tax loss carryforwards aggregating approximately

Millions of Yen

Thousands of
U.S. Dollars

2015

2015

¥30,888 million ($258,975 thousand) which are available to be offset against taxable income of such

Current assets¥14,441$121,078

subsidiaries in future years. These tax loss carryforwards, if not utilized, will expire as follows:

Noncurrent assets

27,418229,882

Goodwill

28,744

241,000

Current liabilities

28,219236,598

Year Ending February 28 or 29

2015

Millions of Yen¥963

Thousands of
U.S. Dollars$8,074Long-term liabilities

6,114

51,262

36,270304,100

2018

1,369

11,478

Cost of purchase of investments in subsidiaries

2019

571

4,787

Cash and cash equivalent of newly consolidated companies

5,803

48,6552020

11,950100,193

2021

4,975

41,712

Purchase of investments in subsidiaries resulting in change
in scope of consolidation¥30,467$255,445

2022

8,511

71,359

2023

442

3,706

The following is a breakdown of assets and liabilities at the time United Entertainment Holdings Co., Ltd. and

2024

2,107

17,666its subsidiary United Cinema Co., Ltd. was newly consolidated through purchase of shares, and the difference

Total¥30,888$258,975

between the cost of purchase of United Entertainment Holdings Co., Ltd. shares and proceeds from thepurchase.

98

Lawson, Inc. Integrated Report 2015

Millions of Yen

Thousands of
U.S. Dollars

2015

2015

Current assets¥3,947$33,094

Noncurrent assets

7,307

61,264

Goodwill

9,563

80,179Current liabilities

4,764

39,943Long-term liabilities

3,036

25,455

Cost of purchase of investments in subsidiaries

13,017

109,139

Cash and cash equivalent of newly consolidated companies

2,103

17,632

Purchase of investments in subsidiaries resulting in change
in scope of consolidation¥10,914$91,507

Lawson, Inc. Integrated Report 201599

Financial Section

17 LEASES

Depreciation expense, interest expense, and other information under finance leases:

The Companies lease certain store facilities, machinery, computer equipment, office space, and other assets.

Thousands of
U.S. Dollars

Millions of Yen

2015

Obligations under finance leases and future minimum payments under noncancelable operating leases as ofDepreciation expense

February 28, 2015 and 2014, were as follows:
Millions of Yen

Thousands of U.S. Dollars

2015
Finance
Leases2015

2014
Operating
LeasesFinance
LeasesOperating
LeasesFinance
LeasesOperating
LeasesDue within one year

¥19,948¥1,064¥16,586¥914$167,251$8,921

Due after one year

76,174

1,498

61,667

1,295

638,669

12,560

Total¥96,122¥2,562¥78,253¥2,209$805,920$21,481

2015

2014

¥1,686¥2,662$14,136

Interest expense

38

103

319

Lease payments

1,833

3,016

15,368

140

178

1,174

8

32

67

Reversal of allowance for impairment loss on leased property
Impairment loss

Depreciation expense and interest expense, which are not reflected in the accompanying consolidated
statements of income, are computed by the straight-line method and the interest method, respectively.

Pro Forma Information of Leased Property Whose Lease Inception Was before February 28, 2009
ASBJ Statement No. 13,

Accounting Standard for Lease Transactions requires that all finance lease

18 COMPREHENSIVE INCOME

transactions be capitalized to recognize lease assets and lease obligations in the balance sheet. However,The components of other comprehensive income for the years ended February 28, 2015 and 2014, were as

ASBJ Statement No. 13 permits leases without ownership transfer of the leased property to the lessee andfollows:

whose lease inception was before March 31, 2008, to continue to be accounted for as operating lease
2015

The Companies applied ASBJ Statement No. 13 effective March 1, 2009, and accounted for such leases
as operating lease transactions. Pro forma information of leased property whose lease inception was before
Thousands of
U.S. Dollars

Millions of Yen
Furniture, Fixtures, and Equipment and Other Assets

Acquisition cost
Accumulated depreciation2015$ (3,622)

(9)

(193)

Amount before income tax effect

(455)

(272)

(3,815)

Income tax effect

155

100

1,300

¥ (300)¥ (172)$ (2,515)

2015¥13,773$65,088

Total
Land Revaluation Difference

11,49060,267

429

673

3,597

Adjustments arising during the year

$1,224Foreign currency translation adjustments¥146¥1,610Obligations under finance leases:
Thousands of
U.S. Dollars

2015¥2,089Reclassification adjustments to profit or loss

(1,127)

Due within one year¥610

¥1,793$5,114Due after one year

3

629

26

¥613

¥2,422$5,140$8¥2,655$17,515¥962¥2,655$8,066¥ (31)¥ (839)$ (260)(9,449)

Share of other comprehensive loss in associated companies
Losses arising during the year

2015

2014

¥1

Adjustments arising during the year
Total
Millions of Yen

Total¥ (263)

(23)

7,188

Accumulated impairment loss
Net leased property¥ (432)

Reclassification adjustments to profit or loss

2014

¥7,7632015

2014

Unrealized loss on available-for-sale securities
Losses arising during the year

February 28, 2009, was as follows:

Thousands of
U.S. Dollars

Millions of Yen

transactions if certain as if capitalized information is disclosed in the notes to the financial statements.

Reclassification adjustments to profit or loss

1,472

12,342

Total¥1,441(839)$12,082

Total other comprehensive income¥2,104¥1,644$17,641

Allowance for impairment loss on leased property of ¥243 million ($2,037 thousand) and ¥375 million as ofFebruary 28, 2015 and 2014, is included in obligations under finance leases.
The imputed interest expense portion which is computed using the interest method is excluded from theabove obligations under finance leases.

100

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Lawson, Inc. Integrated Report 2015101

Financial Section

19 SEGMENT INFORMATIONAs a result of this change, in the fiscal year ended February 28, 2015, segment profit for the domestic

In March 2008, the ASBJ revised ASBJ Statement No. 17, Accounting Standard for Segment Information

convenience store segment increased by ¥9,404 million ($78,846 thousand), the entertainment/home

Disclosures and issued ASBJ Guidance No. 20, Guidance on Accounting Standard for Segment Information

convenience business segment increased by ¥17 million ($143 thousand) and the Other segment increased

Disclosures. Under the standard and guidance, an entity is required to report financial and descriptiveby ¥1 million ($8 thousand).

information about its reportable segments. Reportable segments are operating segments or aggregations ofoperating segments that meet specified criteria. Operating segments are components of an entity about which(c) Information about sales, profit (loss), assets, and other items is as follows:

separate financial information is available and such information is evaluated regularly by the chief operating

Millions of Yen

decision maker in deciding how to allocate resources and in assessing performance. Generally, segment2015

information is required to be reported on the same basis as is used internally for evaluating operating segment

Reportable Segments

performance and deciding how to allocate resources to operating segments.
(a) Description of reportable segments
The Company s financial information is provided separately by reporting segment and is subject to regularreview by the Board of Directors with regard to the allocation of managerial resources and performance
evaluation. The Companies primary business is the operation of domestic convenience stores, which isundertaken by the incorporation of related businesses.
Therefore, the Companies have made the domestic convenience store unit their main reporting segment,
based on consideration of financial characteristics and the nature of the services provided.
Lawson, Inc. and Lawson Mart, Inc. running the LAWSON, NATURAL LAWSON, LAWSON STORE 100, andother chains̶The domestic convenience store unit operates a franchise system as well as undertaking thedirect management of stores in Japan. SCI, Inc. performs to develop a coherent manufacturing retail model in

Domestic
Convenience
Store

Entertainment/
Home
Convenience
Business¥392,463¥50,688

Other

Total

Reconciliations

Consolidated

Sales:
Sales to external customers¥54,762¥497,913¥497,913

2,917

1,413

1,170

5,500

¥ (5,500)

Total¥395,380¥52,101¥55,932¥503,413¥ (5,500)

Segment profit¥63,864¥2,588¥4,021¥70,473¥9¥70,482

Segment assets

707,340

58,323

115,964

881,627(117,013)

764,61436,927839

2,667

40,43340,433

409

433

551

1,393

1,393

3,806

3,806

48,955

48,955Intersegment sales or transfers¥497,913

Other:
Depreciation
Amortization of goodwill
Payment for associated companies

3,806

Increase in property, plant,andequipment and intangible assets

45,039

1,085

2,831

which waste and redundant work will be reduced that are generated throughout a supply chain starting fromthe procurement of raw materials, to manufacturing, distribution and operations at stores.

Millions of Yen

2014

For entertainment/home convenience business, Lawson HMV Entertainment, Inc. sells concert tickets at

Reportable Segments

Lawson stores, and CD and video media at HMV stores. In addition, United Cinemas Co., Ltd. operates
Domestic
Convenience
Store

Entertainment/
Home
Convenience
Business¥408,018¥44,620¥32,610¥485,248

2,305

1,421

1,084

4,810

¥ (4,810)

Total¥410,323¥46,041¥33,694¥490,058¥ (4,810)¥485,248

Segment profit¥63,299

979¥3,803¥68,081¥46¥68,127(b) Methods of measurement for the amounts of sales, profit (loss), assets, and other items for each reportable

Segment assets

601,71035,544

48,979686,233(65,240)

620,993

segment

Other:
44,008842

2,112

46,962419

274

construction and management of multiplex movie theatres.
From this current consolidated fiscal year under review, for Lawson HMV Entertainment, Inc, due to its rise inimportance, changes were made to the recording method of reporting segments. Based on this change, for

Sales to external customers
Intersegment sales or transfers

The accounting policies of each reportable segment are basically consistent with those disclosed in Note 2,

Operating income is applied in Segment profit.

Depreciation
Amortization of goodwill

Summary of Significant Accounting Policies.
Intersegment sales or transfers are calculated based onmarket price.

Total

Reconciliations

Consolidated

Sales:

segment information of the previous fiscal year, the segment information for the previous year included in (c)Information about sales, plofit (loss), assets and other items has been reclassified.

Other

Payment for associated companies

2,295

Increase in property, plant,andequipment and intangible assets

37,171

1,187¥485,248

46,962

268

961

3,876

6,171

(34)

6,171

927

1,999

40,35740,357

As described in Note 3, the Company and its domestic consolidated subsidiaries changed their depreciation
method of property, plant and equipment to the straight-line method in the consolidated fiscal year started
March 1, 2014.
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Financial Section(d) Information regarding loss on impairment of long-lived assets of reportable segments

Thousands of U.S. Dollars

Millions of Yen

2015

2015

Reportable Segments
Domestic
Convenience
Store

Entertainment/
Home
Convenience
Business

Reportable Segments

Other

Total

Reconciliations

Consolidated

Sales:
Sales to external customers
Intersegment sales or transfers$3,290,543$424,985

24,457

11,847$459,143 $4,174,671
9,810

46,114$4,174,671$ (46,114)$3,315,000$436,832$468,953 $4,220,785

Segment profit$535,457$21,699$33,713$590,869$76$590,945

Segment assets

5,930,578

489,000

972,281

7,391,859(981,077)

6,410,782

Total

Loss on impairment oflong-lived assets¥5,832

¥238

Other

Total

¥2,193¥8,263

Reconciliations

Consolidated¥8,263

Millions of Yen

2014
Reportable Segments

309,608

7,035

22,361

339,004

339,004

Amortization of goodwill

3,429

3,630

4,620

11,67911,679Payment for associated companies

31,911

31,911

31,911

Increase in property, plant,andequipment and intangible assets

Entertainment/
Home
Convenience
Business$ (46,114) $4,174,671

Other:
Depreciation

Domestic
ConvenienceStore377,622

9,097

23,736

410,455

410,455

Loss on impairment oflong-lived assets

Domestic
Convenience
Store

Entertainment/
Home
Convenience
Business¥5,838¥66

Other consists of operating segments that are not included in reportable segments, consisting of Seijo Ishii business, financial services-related business,overseas business, and so on.
2. Reconciliations for segment profit, segment assets, and amortization of goodwill are due to the elimination of intersegment transactions.

Other

Total

¥391

¥6,295Reconciliations¥ (551)

Consolidated¥5,744

Notes: 1.

Thousands of U.S. Dollars

2015
Reportable Segments

Loss on impairment oflong-lived assets

Domestic
Convenience
Store

Entertainment/
Home
Convenience
Business$48,897$1,995

Other

Total

$18,388$69,280

Reconciliations

Consolidated$69,280(e) Information regarding amortization of goodwill and carrying amount of reportable segments
Millions of Yen

2015
Reportable Segments

Goodwill at February 28, 2015

Domestic
Convenience
Store

Entertainment/
Home
Convenience
Business¥8,789¥9,857

Other

Total

¥29,543¥48,189

Reconciliations

Consolidated¥48,189

Millions of Yen
2014
Reportable Segments

Goodwill at February 28, 2014104

Lawson, Inc. Integrated Report 2015

Domestic
Convenience
Store

Entertainment/
home
conveniencebusiness¥6,027

¥727

Other

Total

¥2,965¥9,719Reconciliations

Consolidated¥9,719Lawson, Inc. Integrated Report 2015105

Financial Section

services have payment due dates within one month, while most deposits held as a result of ticket sales

Thousands of U.S. Dollars

transactions have payment due dates within six months.

2015
Reportable Segments
Domestic
Convenience
Store

Entertainment/
Home
Convenience
Business$73,690$82,644

Goodwill at February 28, 2015

The primary purpose of long-term debt is securing the funds required for M&A, and redemption dates are
Reconciliations

Other

Total

$247,699$404,033

within five years.
Consolidated$404,033

The primary purpose of lease obligations related to finance lease transactions is securing the funds requiredfor capital investments, and their maximum redemption dates are fifteen years after the balance sheet date.

The amount under Other is for Seijo Ishii business, the overseas business.
With regard to the liquidity risk associated with fund-raising (risk for which payment cannot be executed on
Amortization of goodwill has been omitted, as similar information is disclosed in (c) Information about sales,

the payment due date), the Company prepares and updates financial plans on a timely basis and manages

profit (loss), assets, and other items.

liquidity risk by measures, including maintaining liquidity on hand.
(3) Fair Values of Financial Instruments
Fair values of financial instruments are based on the quoted price in active markets. If a quoted price is not

20 RELATED PARTY TRANSACTIONS

available, other rational valuation techniques are used instead. The result of estimation might differ if other

Balances and transactions of the Company with subsidiaries of Mitsubishi as of and for the years ended

valuation techniques were used.

February 28, 2015 and 2014, were as follows:

Millions of Yen
Thousands of
U.S. Dollars

Millions of Yen

February 28, 2015

Carrying
AmountCash and cash equivalents¥76,755

Unrealized
Gain/Loss

Fair Value¥76,755

2015

2014

2015

Accounts payable̶trade¥45,736¥43,961$383,466

Accounts receivable

Purchases

582,268

502,344

4,881,932

Investments securities

5,575

5,575

Lease deposits

92,71989,755(2,964)

Total¥268,275¥265,311¥ (2,964)

Accounts payable¥153,957¥153,957

Money held as agent

103,634

103,634

Long-term debt (include current portion of long-term debt)

155,122155,006¥ (116)

Total¥412,713¥412,597¥ (116)Time deposits

Mitsubishi Shokuhin Co., Ltd.:

Purchase prices and other conditions are determined at an arm's-length basis.

21 FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES(1) Policy for Financial Instruments

4

4

93,222

93,222The Companies primarily use short-term deposits, etc., to manage their funds and raise funds as necessary
through borrowings from financial institutions and leasing according to the financing plan. The Companies do
not engage in derivative transactions.
(2) Nature, Extent of Risk, and Risk Management System for Financial Instruments
Trade receivables, such as other accounts receivable, are exposed to credit risk from business counterparties.
Lease deposits are exposed to credit risk from the owners, etc. The responsible department monitors theserisks on receivables on a daily basis with the aim of early detection and reduction of concerns associated withthe collectibility of debt due to deterioration in the financial conditions of the owners.
Investment securities are primarily shares of companies with business relationships and listed shares ofwhich are exposed to the risk of market price fluctuations. With regard to this risk, the Company monitors thefinancial conditions of business counterparties on a regular basis.
Among trade payables, most of the accounts payable̶trade and deposits held as a result of bill settlement106

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Lawson, Inc. Integrated Report 2015107

Financial Section

Accounts payable and money held as agent

Millions of Yen
February 28, 2014

Carrying
AmountCash and cash equivalents¥68,760

Fair Value

Unrealized
Gain/Loss

The carrying values of accounts payable and money held as agent approximate fair value because of theirshort maturities.

¥68,760

Time deposits

8,004

8,004

Long-term debt (including current portion of long-term debt)

Accounts receivable

84,02584,025

The fair values of long-term debt are determined by discounting the cash flows related to the debt at theInvestments securities

Companies assumed corporate discount rate.

917

917

Investments in associated companies

3,876

3,881

Long-term loans receivable

33,66033,70242

Lease deposits

85,69981,026(4,673)

Total¥284,941¥280,315¥ (4,626)

Accounts payable¥121,790¥121,790

Money held as agent

87,586

87,586Long-term debt (include current portion of long-term debt)

78,25378,580¥327

Guarantee deposits received from ranchised stores and other

32,25330,436(1,817)¥319,882¥318,392¥ (1,490)

Total

¥5

(4) Financial Instruments Whose Fair Value Cannot Be Reliably Determined
Carrying AmountThousands of
U.S. Dollars

Millions of Yen

2015

2015

2014

Investments in equity instruments that do nothave a quoted market price in an active market¥1,313¥971$11,009

Investments in unconsolidated subsidiaries and affiliated companies

11,447

7,106

95,975

Others1,446

388

12,124

Thousands of U.S. Dollars
February 28, 2015

Carrying
AmountFair Value

Cash and cash equivalents$643,540$643,540

34

34

781,604

781,604

Time deposits
Accounts receivable

Unrealized
Gain/Loss(5) Maturity Analysis for Financial Assets and Securities with Contractual Maturities
Millions of Yen

2015
Due in1 Yearor Less

Investments securities

46,743

46,743

Lease deposits

777,387

752,536(24,851)

Total$2,249,308$2,224,457$ (24,851)

Accounts payable$1,290,828$1,290,828

Money held as agent

868,902

868,902

Long-term debt (include current portion of long-term debt)

1,300,595

1,299,623$ (972)

Total$3,460,325$3,459,353$ (972)

Cash and cash equivalents

Due after
1 Year through5 Years

Due after
5 Years through10 Years

4,859¥19,402¥24,240¥44,705¥177,337¥19,402¥24,240¥44,705¥76,755
4

Time deposits
Accounts receivable
Lease deposits
Total

95,719Cash and cash equivalents, time deposits, and accounts receivable

Millions of Yen

The carrying values of cash and cash equivalents, time deposits, and accounts receivable (including allowance2014

for doubtful accounts) approximate fair value because of their short maturities.
Investment securities
The fair values of investment securities are measured at the quoted market price on the stock exchange
for the equity instruments, and at the quoted price obtained from the financial institution for certain debt
instruments.
Lease deposits

Due after
10 Years

Due in1 Yearor Less

Cash and cash equivalents

8,004

Accounts receivable

86,379Lease deposits
Total

Due after
5 Years through10 Years

Due after
10 Years¥68,760

Time deposits
Long-term loans receivable

Due after
1 Year through5 Years295¥14,941¥10,165¥8,327

4,902

19,361

20,717

41,170¥168,340¥34,302¥30,882¥49,497

The fair values of lease deposits (including allowance for doubtful accounts) are determined by discounting
future cash flows which reflect the collectibility with the yield rate of government bonds during the remaining
period.

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Financial Section(ii) Main reason for the business combination

Thousands of U.S. Dollars

1. The acquired business has been developing its business in the movie industry, which the Company

2015
Due in1 Yearor Less

Due after
1 Year through5 Years

Due after
5 Years through10 Years

has been interested in, and is seeing steady revenue growth in the movie business, which has a large
Due after
10 Years$643,540

Cash and cash equivalents
Accounts receivable

802,540

Lease deposits

40,740$162,673$203,236$374,822$1,486,854$162,673$203,236$374,822

Total

2. The acquired business has a strong connection to the entertainment business, which the Companies
are engaged in, and the Company expects a mutual increase in customers and business synergies.

34

Time deposits

number of participants and boasts continuous stable growth.

(iii) Date of business combination
August 28, 2014(iv) Legal form of business combination
Acquisition of shares

22 NET INCOME PER SHARE
Reconciliation of the differences between basic and diluted net income per share (EPS ) for the years

There is no change.

ended February 28, 2015 and 2014, is as follows:Year Ended February 28, 2015

Basic EPS̶Net income available to commonshareholders

Millions of Yen

Thousandsof Shares

Net Income

WeightedAverage Shares¥32,686

99,932

Effect of dilutive securities̶Stock options
Diluted EPS̶Net income for computation(v) Name of company after the business combination

Yen

U.S. Dollars

100%

EPS

¥327.08$2.74

134¥32,686

100,066¥326.65(vi) Acquire of voting rights$2.74(vii) Main reason to decide the acquiring company
Lawson HMV Entertainment United Cinemas Holdings, Inc. the Company's consolidated subsidiary has
acquired the stock of United Entertainment Holdings, Inc. by cash.
b. Period in which the acquired company's results are included in the consolidated financial statements

Year Ended February 28, 2014

Basic EPS̶Net income available to commonshareholders

Thousandsof Shares

Yen

Net Income

WeightedAverage Shares

EPS¥37,965

Effect of dilutive securities̶Stock options
Diluted EPS̶Net income for computation

From September 1, 2014 to December 31, 2014

Millions of Yen

99,898¥380.04

181¥37,965

100,079¥379.35c. Acquisition cost and component
Millions of Yen

Acquisition priceCash and cash equivalents

Costs directly required for the acquisition

Advisory costs

Acquisition costThousands of
U.S. Dollars¥12,973$108,770

44369¥13,017$109,139

Amount, cause, amortization method and period of goodwill generated

23 BUSINESS COMBINATIONS(1) Acquisition of United Entertainment Holdings Co., Ltd. and United Cinemas Co., Ltd.

(i) Amount of goodwill generated¥9,563 million ($80,179 thousand)a. Outline of business combination(i) Name of the acquired business and summary of its business(ii) Cause of the generation of goodwill

Name of business: United Entertainment Holdings Co., Ltd. and United Cinemas Co., Ltd.

Mainly excess earning power that is anticipated from the low-cost business model in which stable

Business summary: Construction of movie theatres and management of the businessgrowth is expected.
(iii) Method and period of amortization
Straight-line method over twenty years

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Financial Section

e. The amount and major breakdown of assets received and liabilities assumed on the date of the businessc. Acquisition cost and component

combination
Millions of Yen

Current assets¥3,947

Noncurrent assets

Thousands of
U.S. Dollars

Millions of Yen

Acquisition priceCash and cash equivalents$33,093

Costs directly required for the acquisition

Advisory costs

Acquisition cost

7,307

61,264

Total assets¥11,254$94,357

Current liabilities¥4,765$39,951

Long-term liabilities

3,035

25,447

Total liabilities¥7,800$65,398(2) Acquisition of SEIJO ISHII CO., LTD.
a. Outline of business combination(i) Name of the acquired business and summary of its businessThousands of
U.S. Dollars¥36,138$302,994

131

1,098

¥36,269$304,092

d. Amount, cause, amortization method and period of goodwill generated(i) Amount of goodwill generated¥28,743 million ($240,991 thousand)(ii) Cause of the generation of goodwill
Mainly excess earning power that is anticipated from the business model of a high revenue retailmanufacturing business in which stable growth is expected.

Name of business: SEIJO ISHII CO., LTD.
Business summary: Food retailing, import, wholesale, food manufacture and restaurant operations
business(ii) Main reason for the business combination(iii) Method and period of amortization
Straight-line method over twenty years
e. Amount and category allocated to intangible assets other than goodwill, and amortization period of category

The Company and the acquired company are both engaged in retail manufacturing. In addition, anCategory

Trademark rightalliance with the acquired company, which has product appeal and sales power that exceed those ofAmount of money¥12,000 million ($100,613 thousand)ordinary supermarkets, has the potential to generate a significant synergy.

Amortization period

twenty years(iii) Date of business combination
October 31, 2014 (acquisition date)f. The amount and major components of assets received and liabilities assumed on the date of thebusiness combination

September 30, 2014 (deemed acquisition date)Millions of Yen(iv) Legal form of business combination
Acquisition of shares(v) Name of company after the business combination
There is no change.

Thousands of
U.S. Dollars

Current assets¥14,441$121,078

Noncurrent assets

15,417129,262

Total assets¥29,858$250,340

Current liabilities¥28,218$236,589

Long-term liabilities
Total liabilities

1,837

15,402¥30,055$251,991(vi) Acquire of voting rights
100%

24 SUBSEQUENT EVENT(vii) Main reason to decide the acquiring company

Appropriation of Retained Earnings

The company acquired the stock of SEIJO ISHII CO., LTD. by cash.
The following appropriation of retained earnings was approved at the general shareholders meeting held on
b. Period in which the acquired company's results are included in the consolidated financial statements

May 26, 2015:

From October 1, 2014 to December 31, 2014
Millions of Yen

Cash dividends, ¥120 ($1.01) per share112

Lawson, Inc. Integrated Report 2015

¥11,999

Thousands of
U.S. Dollars$100,604

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Independent Auditor’s Report

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