INTEGRATED REPORT 2019

Creating Happiness and Harmony in Our Communities

Declarations

New corporate slogan for a leap forward in the new Reiwa era.
LAWSON strives becoming a“Hot Station (Best Relief Hub) in Our Communities”
We respond to social issues by honoring our three promises under
the New Lawson Declaration while striving to become “every
customer’s No. 1 recommended brand.”Our three promises: “Superior taste,” “Human kindness,” and “Environmental (Machi*) friendliness.”
We promptly identify social problems that our customers care about and society’s ever-changing diverse values,
and respond to them in a swift manner through innovations and enhanced product line-up and services. By doing
so, we strive to become a “Hot Station (Best Relief Hub) in Our Communities” which everyone can happily visit
and find “Whew!” Surprises.
The new Lawson will continue to support and grow with its customers.
* Machi (literally “town”) refers to the communities in which Lawson operates and, by extension, the global village as a whole.

President and CEO, Representative Director,
Chairman of the Board

Corporate Philosophy

Creating Happiness andHarmony in Our Communities
VisionNew era, new life, new convenience store—this novelty truly
excites us, and we want to share this excitement with all ofyou. Lawson is committed to becoming a “Hot Station (Best
Relief Hub) in Our Communities” through the three “Whew!”
Surprises. New era, New Lawson.

Surprise“Whew!”
discoveries

Surprise“Whew!”
happiness

Surprise“Whew!”
kindness[Note: ほっ = Whew!]

To be a leading company in execution
Think through customers’ needs and changes, execute with speed
and become an essential part of our communities.
Code of Conduct

1. Think as customers, communities and stores.
2. Master the basics and strive to innovate.
3. Improve the quality and speed of the Plan-Do-Check-Act cycle.
4. Act with discipline, take initiative and succeed as a team.
5. Grow as individuals and support the growth of our teammembers.

CONTENTS
Declarations
Financial & Non-financial Highlights............................. P2

Resolving community problems
and providing unique value..................... P18

Strategy for Sustainable Growth
Message from the President..................................... P4

Superiortaste• Providing new value for the diverse people of Japan andregionwide, and contributing to relaxing lives for everyone in thecommunity

Message from the CFO.......................................... P10• We will invest to support and build stronger relationships with
our franchise stores in order to increase dividends in the shortterm by recovering profitability.

Humankindness

Our Sustainable Growth
Lawson’s Corporate DNA...................................... P12

Corporate Value Creation Cycle
and Initiatives for SDGs
Corporate Value Creation Cycle............................ P14
Initiatives for SDGs................................................ P16

Lawson Communication Media
Lawson Website
Presents information and data not covered by Lawson publications.
Integrated Report

Financial Section

Environmental(Machi)friendlinessSuperior taste............................................. P20• CHALLENGE 1 T
 o contribute to more delicious living• CHALLENGE 2 T
 o satisfy a diverse range of personal preferences• CHALLENGE 3	To spread happiness through wide-ranging
entertainment and financial services

Human kindness........................................ P24• CHALLENGE 1	Challenging better health through delicious
products• CHALLENGE 2 To
 participate closely in the life of every customer• CHALLENGE 3 To
 help franchise stores conduct business with asmile• CHALLENGE 4 To
 employ digital innovations to address thelabor shortage issue• CHALLENGE 5 To realize a Lawson where anyone can work for an
extended period cheerfully, energetically and joyfully

Environmental (Machi) friendliness.......... P32• CHALLENGE 1 To reduce food waste• CHALLENGE 2 To reduce plastic use• CHALLENGE 3 To reduce plastic shopping bag use• CHALLENGE 4 To reduce CO2 emissions

Corporate Governance
Executives.............................................................. P34
Directors’ Perspectives.......................................... P36
I will leverage Mitsubishi Corporation’s strengths to provide full
support for Lawson’s sustainable growth.
Director Kazunori Nishio
Dialogue with our communities conducted through three years of businessreformation has provided the basis for Lawson’s unique character.
Outside Director Emi Osono
I can hardly wait to see where Lawson will lead the industry in the“Convenience Store 3.0” era.
Outside Director Miki Iwamura

Characteristics and system of Corporate Governance........ P38
Compliance and Risk Management....................... P42
Eleven-Year Financial Summary................................ P46

Corporate Information............................... P48• Corporate Data • Share Information• Main Lawson Group Companies • Executive Officers• Store Network Development • Main Businesses and Services

Lawson has been adopted as a constituent of the ESG investment stock price index.
* Current as of February 2019

Its adoption accords to all three selection indicators for ESG investments made by the Government Pension
Investment Fund (GPIF).
“FTSE Russell confirms that Lawson, Inc. has been independently assessed according to the index criteria, and has
satisfied the requirements to become a constituent of the FTSE Blossom Japan Index. Created by the global index
and data provider FTSE Russell, the FTSE Blossom Japan Index is designed to measure the performance of Japanesecompanies demonstrating strong Environmental, Social and Governance (ESG) practices. The FTSE Blossom Japan
Index is used by a wide variety of market participants to create and assess sustainable investment funds and otherproducts.”

Range of the report

Although portions of this report were produced incooperation with business partners in fields such as
logistics, food manufacturing and waste disposal,
its focus is primarily on the business activities of
Lawson, its franchise stores and certain affiliatedcompanies.

Reporting period

This report covers fiscal year 2018 (March 1,
2018 ~ February 28, 2019), with some reportingon activities before and after this period. See theLawson website for further details:

http://lawson.jp/en/

E S G
An overview of the Lawson Group’sbusiness activities rooted in local
communities and the outlook forsustainable future growth

A report on industry trends and the Lawson
Group’s business initiatives and financial
position in the relevant years, as well as
projected earnings assessments/analyses
and the outlook for the next fiscal year

E

SDGs Handbook

S

A guide to realizing our Corporate Philosophy, “Creating
Happiness and Harmony in Our Communities,” bydetermining our top priorities and Key Performance
Indicator (KPI) objectives and incorporating them into
efforts to attain the Sustainable Development Goals (SDGs)

Future forecasts, projections and plans

The MSCI Japan Empowering Women Index represents
the performance of companies that provide leadership in
promoting and maintaining gender diversity in their GICS®
sector.

The MSCI Japan ESG Select Leaders Index consists of companies
with high Environmental, Social and Governance (ESG) performanceselected from its parent index, the MSCI Japan IMI Top 700 Index,
targeting 50% of the market capitalization of each Global Industry
Classification Standard (GICS®) Sector of the parent index.

*	THE INCLUSION OF LAWSON, INC. IN ANY MSCI INDEX, AND THE USE OF MSCI LOGOS, TRADEMARKS, SERVICE MARKS OR
INDEX NAMES HEREIN, DO NOT CONSTITUTE A SPONSORSHIP, ENDORSEMENT OR PROMOTION OF LAWSON, INC. BY MSCI OR
ANY OF ITS AFFILIATES. THE MSCI INDEXES ARE THE EXCLUSIVE PROPERTY OF MSCI. MSCI AND THE MSCI INDEX NAMES AND
LOGOS ARE TRADEMARKS OR SERVICE MARKS OF MSCI OR ITS AFFILIATES.
*	GICS® is the Global Industry Classification Standard, an industry classification system created jointly in 1999 by the U.S.-based Standard and Poor’s
credit rating firm and the global financial group Morgan Stanley Capital International.

1
LAWSON INTEGRATED REPORT 2019

This report’s coverage extends beyond current
information and data for the Lawson Group to futureforecasts based on its plans and perspectives 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 tovarious circumstances and external environmental
factors.

Financial Section

The English version of the Financial Section is theofficial version, whereas the Japanese version
does not contain notes to the financial statements.
Refer to the Company’s securities report for details
concerning the notes.

Financial & Non-financial Highlights

Financial Highlights
Consolidated net sales by all stores

Approx.

2.4(Billion yen)
2,500
2,250
2,000
1,750

1,961.9 2,049.5
3.6

3.5

1,500

2,157.9

Consolidated operating income

60.7(Billion yen)
800

(%)
4.0

2,424.5thousand yen(Thousand yen)
600

(%)
20.0

65.8

600

3.5

531

%

73.7

72.5

70.4

Average daily store sales in Japan

9.3

billion yen

trillion yen

2,283.6

ROE (return on equity)

60.7

533

540

540

536

531

2014

2015

2016

2017

2018 (Fiscal year)

500

16.0

13.5
400

3.4

12.0

1,250

400

3.0

1,000

12.0

300

9.7

8.0

2.9

750
500

13.0

200

2.5

2.5

9.3

200

4.0

100

250
0

2014

2015

2016

2017

0

2.0

2018 (Fiscal year)

2014

2015

2016

2017

0

0

2018 (Fiscal year)

2014

2015

2016

2017

2018 (Fiscal year)

Consolidated net sales by all stores (left axis)
Consolidated operating profit ratio (right axis)

Changes in the number of stores

Changes in share prices (monthly)

17,015(Yen)
12,000stores(Stores)
20,00010,00017,01515,00010,0009,827

10,05910,313

10,827

11,577

12,08912,973

13,273

Increase in consumption tax(from 5% to 8%)

14,399

8,000

Great
Recession

15,728Great East
Japan Earthquake

6,000

4,000
5,000
2,000
0

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Domestic

2018 (Fiscal year)

0

Overseas

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019
(Year)

2
LAWSON INTEGRATED REPORT 2019

Non-financial Highlights
Net income per share

Electricity use (index) andCO2 emissions per store

255

Rate of food recycling &number of participating stores

yen

(Yen)
400

(%)
100

363
326

Base year

86.3

80

313

300

268

255

79.8

100.0

86.5

80.0

2016

2017

2018 (Fiscal year)

Payout ratio

99.7

2010

250
200

95.1
240
73.4

245

250

255

99.7

(%)
100

255

68.7

60

40
100

0

2014

2015

2016

2017

0

2018 (Fiscal year)

Cash dividends applicable to the year (left axis)
Payout ratio (right axis)

7,403

78.5
75

10,000600

13,973

50

900
5,000
0

300

0

2000

667

652

655

2016

2017

2018 (Fiscal year)

Number of working mothers & their
proportion among female employees

Percentage of male employees
taking paternity leave

Ratio of independent directors
among directors

24.2

91.0

%

%

(Persons)
250

(%)

35
30

24.2

150

202

50
0

4.6
10

23

2001

2005

67
2010

91.0

80

20

16.0

100

(%)
100

25

70.4

60

15
10

40

5

20

0

0

2018 (Fiscal year)

Number of working mothers (left axis)
Percentage of working mothers among female employees (right axis)

3
LAWSON INTEGRATED REPORT 2019

80.3

80.1

16.1

2014

2015

2016

2017

2018 (Fiscal year)

25

0

Weight of plastic shopping bags used per store (left axis)
Plastic shopping bag handout rate (right axis)* Excluding figures of LAWSON 100

8.4
20

50

10

77.5

*C
 alculated from April 1 to March 31 of the following year to coincide with theadministrative fiscal year

200

150

906

78.0

* Calculated from April 1 to March 31 of the following year to coincide with theadministrative fiscal year

80

78.1

22.5

20

Base year(%)
100

15,00020072018 (Fiscal year*)
Number of stores implementing (right axis)
Waste oil recycling
Conversion to animal feed and fertilizer
Heat recovery
Rate of implementation of activities
such as food recycling (left axis)

2020 (Fiscal year*)

Annual electricity use index (left axis)
CO2 emissions (right axis)

%

(Yen)
300

30

900

110

0

0

2018

3,031

Base year

(kg)
1,200
(Stores)
20,000

47.9

40

20

0

2015

(%)
50

40

20

2014

100

655

kg

%

60

40

100

120

80

68.2

60

200

0

47.9

(t-CO 2)20%
reduction
targeted

Plastic Shopping Bags Used Per Store*

38Strategy for Sustainable Growth
Message from the President

Providing new value for the diverse people of Japan and regionwide,and contributing to relaxing lives for everyone in the community
A priority on supporting
our franchise storesand strengthening store
capabilities under the
1,000-Day Action Plan

Sadanobu Takemasu
President and CEO,
Representative Director,
Chairman of the Board

The convenience store’s operating
environment is changing rapidly today.
Fueled by a declining birthrate and aging
population, a labor shortage stemmingfrom contraction of the working-age
population has emerged as a major
problem. As the numbers of working
mothers and single person households
grow, stores located near people’s
homes and workplaces that stock
everything they need in the morning andevening remain indispensable to thecommunity.
Anticipating this situation at an
early date, we devoted ourselves fromfiscal 2016 through fiscal 2018 toproviding better support for our franchiseowners, improving our product offering,
strengthening our store capabilities, andenhancing our new store competitivenesswith the aim of “Creating Happinessand Harmony in Our Communities”
under our Group-wide 1,000-Day
Action Plan. Conducted over four years
beginning in fiscal 2015, these efforts
included introducing a semi-automaticordering system and reviewing the
franchise contract package for franchise4
LAWSON INTEGRATED REPORT 2019owners. Our objective was to develop
a business that brings happiness toeveryone concerned, from our franchiseowners and crew members to Lawson
itself, by establishing a next-generation
convenience store model.
Our primary goals have been toprovide better support for our franchiseowners and to strengthen our store
capabilities.
The various countermeasures
we have introduced to offset the labor
shortage and rising labor costs haveincluded investment in the introductionof digital technologies. We have also
devoted efforts to creating stores whosecrew members can enjoy more rewarding
work, and environments in whichhousewives, seniors and foreigners canwork more easily.
Tablet terminals, POS cash
registers with automatic change
dispensers supporting foreign languages
that free cashiers from conducting
mental calculations, and smartphone
cash register systems currently underdevelopment are among other efforts to
reduce the burden on workers.
We also expanded the network of
stores equipped with Machikado Chubo
in-store kitchens. Besides delighting
customers with the delicious taste ofhome cooking, these offer the additional
advantage of enabling staff with nocustomer service experience to performfood preparation as entry-level work.
Other efforts in this area haveincluded establishing the temporary
staffing agency Lawson Staff, Inc. toorganize systems for dispatching needed
personnel at times of emergency or on
ceremonial occasions. Franchise store
support measures such as these aremaking steady progress in terms of laborsaving.
At the same time, it is important toenhance our daily life support functions
to strengthen the store capabilities. We
have improved our product lineup toprovide firm support for customers' lives
throughout the day, including evening
in addition to morning and lunchtime,and made serious investments to equip
the stores with open food display cases
and taller shelves. Our product lineup
has grown from 3,000 to 3,500 items,

Seeking mutual
consideration and mutual
prosperity with the franchise
stores, our most valued
partner

and the level of daily life support forcustomers has increased as well.
We reassessed the timing of ourthree daily deliveries beginning in June oflast year, moreover, to enhance evening
sales by making it easier for people withbusy work and childrearing schedules toshop at their nearby LAWSON later atnight. I consider the optimization of ourevening delivery services over the courseof a year or so with no confusion to bea significant achievement. The project
involved making preparations withthe understanding of all our partners,
including our suppliers, manufacturing
plants, and distribution centers. We
are currently receiving ample positive
feedback from customers, who makesuch comments as, “My local store is
now well-stocked in the evening, too.”

The changes introduced under theGroup-wide 1,000-Day Action Plan
conducted through fiscal 2018 attracted
considerable attention, but this was byno means our goal. We are constantly
facing serious issues such as the labor
shortage and problems particular to
24-hour operation, with which we andour franchise stores nationwide must
continuously contend.
In our franchise business, weseek mutual consideration and mutual
prosperity that enable our franchise

Supporting everyday life, alleviating the labor shortage
2018
2017
2016

Stronger living
supportLabor shortage
response

Fuller product range

Stronger evening /nighttime ranges• Change order cut-off times• Strengthen core CVS• Lawson Fresh Pick (Loppick)products, and rice-basedlaunch in Tokyo & Kanagawa
Improved ordering
products, FF products• Enhancing life-style support • Enhance Machikado Chubo
accuracy
Expand daily delivered,in-store kitchen• Introduce SA systemfrozen foods• New tablets• Reduce store processes• Expand Stock Keeping Unit
• POS cash registers(SKU)
with automatic change
3,000 3,500 SKU• Labor-saving trials
dispensers• HQ support recruitment at storesSelf-checkout Regi-robo• LAWSON Smartphone pay
Set up Lawson Staff, Inc.
RFID, etc

2015

Improving our productoffering

Year 0Year 1

Year 2

Year 3

5
LAWSON INTEGRATED REPORT 2019

stores and Headquarters to work
together toward sustainable growth. If
the franchise stores, our closest andmost valued partner, should encounter
difficulties, we will naturally join forces
to overcome them. If problems should
develop at Headquarters, on thecontrary, the franchise stores will act
to help us solve them. This is why wealways consider the franchise stores tobe our most valued partner.
Today more than ever, we will
collaborate closely with our franchise
store owners in discussing issues andproblems facing the stores, determining
joint courses of action, and ensuringthat the stores and Headquarters work
together to implement them in the belief
that repeated use of this approach
will make it even more meaningful.

We at Lawson have always cherished
an attitude of consistently building
relationships of equality with our franchise
stores, sharing on-site problems, andsolving them together. In the future, We
hope to further increase the speed of thisproblem-solving process.
Thus, the first priority of our efforts
to remain responsive to the needs ofour customers and the changes in ourcommunities and society must be toprovide both material and moral support
for our franchise stores, which face somany daunting issues today.

New Lawson Identify
Statement targeting growthin the Reiwa era
In the current fiscal year, we introduced
a new Lawson Identify Statement,“Hot Station (Best Relief Hub) in Our
Communities” as our new Corporate
Slogan.
We have been promoting Lawson’scommunity “health support stations”
for eight years now, but I believe that
our customers, franchise store staff
and Headquarters employees have alldeveloped health awareness on theirown by now.
The reputation of our healthconscious product lineup, including
the Natural Lawson brand and our
product offering that differs in various

ways from those of other chains, is now
firmly established, and programs suchas Healthcare LAWSON and LAWSON
hospital stores have gained wide
recognition. We also conduct thoroughhealth management of our employees
and franchise store staff, and maintain an
employee health check-up rate of 100%.
We no longer view health as a pressing
issue, but rather as something to be
improved further.
Conceived in the Showa era,
Japan’s convenience store businessgrew to immense size in the Heisei erathat followed. With the nation’s entry
this year into the new Reiwa era, wereassessed our target image for the
Lawson of tomorrow and made threepromises to our stakeholders.
These there promises, “Superior
taste,” “Human kindness” and“Environmental (Machi) friendliness,”
express our desire to become a Lawsonthat earns praise as a “truly good store”
from any point of view.
The term “Hot Station (Best ReliefHub) in Our Communities” is perfectly
suited to describing a store that realizes
this vision. In an era ongoing challenges,
such as conducting business 24 hours a
day and installing restrooms, Lawson has
emerged as a “Hot Station (Best ReliefHub) in Our Communities” Today, withapproximately 14,500 stores nationwide,
the Company is maintaining its essential

taste” is applicable but not limited to
our food items. We want the products
we offer and the wide-ranging services
available at our stores to impart good
taste to every aspect of customers’ daily
lives. This is the source of our promise of“Superior taste.”
Secondly, “Human kindness” isalways our first consideration whenit comes to our health-conscious
product lineup, franchise store working
environments and support franchiseStore functions. We realize that Lawson
has no reason to exist if it is notfriendly to the communities in which it

pursuit of community happiness while
evolving with the new era in accordancewith its three promises. Our hopes andpromises are the basis for our new
corporate slogan, “Hot Station (Best
Relief Hub) in Our Communities.”
In this connection, please note thatthe three dots over the “” (Whew!) in
our logo represent the three promises.

Implementing our threepromises to realize the SDGs
Let me begin by clarifying the meaningsof our three promises. First, “Superior

6
LAWSON INTEGRATED REPORT 2019

The Three Lawson Promises
Superior
taste

Human
kindness

Environmental(Machi)friendliness

Stronger Private Brand

Change nutritional
information labeling
Reduce salt & additives

Reduce food waste
Reduce plastics use

Stronger frozen foods

Low salt

No straw
Paper cups

Low-carb
Reduced CO2 emissions

Low
additives

For more information, Go to page 16

Message from the President

operates and, in the end, to the global
environment. This is the reasoning
behind our third promise, “Environmental(Machi) friendliness.”
Fiscal 2019 has seen theestablishment of the new SDGs*
Committee. The SDGs comprise 17
goals for sustainable global development,
but we believe that simply building
Lawson’s business based on our threepromises will naturally lead to realizationof the SDGs as well.
We also introduced food waste
reduction program during the year aspart of efforts to reduce food waste andobtain sufficient food for children. The
program gives points to customers whopurchase boxed meals and rice balls
during evening and nighttime hours as
their sell-by deadline approaches, while
also donating a portion of the income
from sales to children’s support groups.
Implementation of the program has
just begun, but it is certain to produce
ongoing results.

For more information, Go to page 32

We are working to reduce theamount of plastic used by the stores,
meanwhile, as part of active efforts tocombat the waste plastic issue. We
have changed our iced coffee containers
to paper cups one after another andrefashioned the lids of our MACHI café
fresh-brewed coffee containers into
shapes that permit trouble-free drinking,even without a straw. We also continue
to ask customers at the cash register
whether they need plastic shoppingbags, chopsticks or spoons. These
individual actions may be small, but
total resource savings by our 14,500
stores nationwide will doubtless register
significant results.
We are committed to conducting
our daily activities in the awareness that
acting according to the three promises
will lead to realization of our corporate
philosophy and the SDGs.
* SDGs (UN Sustainable Development Goals): Global
sustainability goals adopted by the United Nations
General Assembly in 2015 for realization in theyears to 2030.

Wide-ranging efforts
to realize the value
accompanying employment
of diversified humanresources
The promise of “Human kindness”
applies equally to the determination ofwork requirements and diversification of
Headquarters employees. Lawson has
been implementing operational reforms
under the Group-wide 1,000-Day Action
Plan since its introduction four years ago.
It has identified jobs that require long
working hours and irregular work styles,
discontinued outdated or otherwise
inappropriate policies, digitalized routine
tasks whenever possible, and introduced
reforms to improve work efficiency.
This approach to work-style reform has
gradually taken root and spread outward
from our various regional branches.
In the future, we will accelerate
our pursuit of work satisfaction. Whenemployees working a standard shiftof 7 hours 45 minutes find the work
meaningful, the time they spend
becomes meaningful for the Company
as well. Even if the time worked is just
3 or 5 hours, we will continue to pay
close attention to whether workers findmeaning and satisfaction in various styles
of working. Recognizing the significanceof Lawson’s aims and the role of each

7
LAWSON INTEGRATED REPORT 2019individual in achieving them can provide
motivation for working. We intend to takeup these and other challenges together
with our employees.
We have played a leadership rolein corporate efforts to diversify humancapital. Since 2005, the ratio of women
to men among new employees has beenclose to 50%, and 15 to 20% of new
employees today are foreign nationals.
The most important factor in this tome is the birth of new value that occurs
when different value cultures collide.
This new value leads to innovation, as I
believe the Lawson culture demonstrates.
The same is true of our franchise
stores. Steps to deal with the labor
shortage include making it easier forinternational students to work, producing

multilingual manuals for POS cash
registers and using photos and othervisuals to make the manuals easily
understandable. We intend to accelerate
efforts of this kind to develop workplacesin which people of all kinds can workwith ease.
Both Headquarters and thefranchise stores can create new value byrecognizing the value provided by othernationalities and genders. This is the kindof environment we are working to create.

Developing wide range ofstores to meet communities’
needs
The rights and wrongs of implementing
a dominant convenience store strategy
have been widely discussed in recent
years. Rather than sticking to certain set
policies, Lawson has opened stores incommunities wherever the need arises,
covering every prefecture nationwide
ahead of other chains.
This year we plan to open 700
stores and close 700 stores, but thisdoes not imply stagnation. We aretargeting growth through assessmentof individual communities’ needs andthe prospects for stable operation of
franchise stores.
I consider it only natural that thesystem in which virtually every LAWSON
convenience store operates during thesame hours and offers the same productlineup, which supported rapid growthin the Heisei era, should change alongwith society. Today, mutual recognition is
spreading more and more quickly of theextremely wide diversity of values existingin society at large and among individual
customers. The manner in which we
respond is of crucial importance.
On another front, we areexperimenting with unmanned nighttime
store operation that makes the mostof digital technologies. We believe thiswill become requisite in urban areas.
We are also increasing the numberof LAWSON stores equipped withdispensing pharmacies and nursing
care consultation windows in response
to feedback from customers suchas mothers who tell us they would
appreciate having better access to
medicine at a nearby LAWSON store
when their nursery school-age children
develop symptoms such as fevers.
Our stores also serve as
regional centers where residents ofevery generation gather. With therecent proliferation of nuclear families
in regional areas and with people
everywhere becoming increasingly
busy, the community-based LAWSON
store has immense potential to create
previously unknown value in response

8
LAWSON INTEGRATED REPORT 2019

to their diversifying needs. We therefore
anticipate continuing dynamic growth
going forward.
I also foresee a future in which
the convenience store becomes anincreasingly regional institution. There is,of course, considerable value in making
the same products and services available
at any store in the country. People incommunities with their first LAWSON
store often express their pleasure in
the new ability to “purchase productsthat were previously sold only in Tokyo”
and thank us for enabling them to “buyproducts such as tiramisu cakes and
GODIVA chocolates dessert close tohome.” This is the value of product lineup
leveling.
At the same time, however, if
the same products and services were
offered under the LAWSON signboard in
Hokkaido and Okinawa, the respective
stores might not really be providing thevalue their customers are looking for.
In Okinawa, for example, we stock a

Doramocchi (Doarayaki,
SAKUBATA
Crispy pistachio butter with sweet bean paste &whipped cream)cookie sandwich

Message from the President

variety of local private brand products
through a tie-up with SAN-A CO., LTD.,a major regional supermarket chain.
Not only do local customers appreciate
this, but visitors from other prefecturesand outside Japan also appreciate
the new value Lawson Okinawa offers
through this program. LAWSON stores in
Kagoshima prefecture are currently rising
to this same type of challenge.
Selling large numbers of basic
products nationwide and adding
products and services for the sake ofregionalism and diversification in thisway requires us to determine how tobalance the two and add new value.
Society’s values will change even morein the Reiwa era. We expect to see
increasing demand for a varied mix of
LAWSON stores operating under thesame signboard, and are preparing tomeet this challenge. I believe our ability
to achieve sustainable growth into the
future will depend on our own efforts andthose of our franchise stores.
When traveling around Japanand talking to people, I find there arestill many communities that are ripe
for a LAWSON store. If we consider
only metropolitan areas such as Tokyo,
convenience stores may seem to havereached the saturation point, but there
are still many people in regional areas
who have trouble finding places to shopor who cannot purchase the same

products as in Tokyo. The numbers ofelderly people and working mothers andtheir children in Tokyo who find shoppingdifficult are increasing as well, creatinga need for a new type of neighborhood
store in urban areas.
I consider determining ways of
responding to society’s needs andcreating new value to be more important
than simply increasing the number of
LAWSON stores.

Promoting strategic
development whileleveraging the power of
Mitsubishi Corporation
The support it receives from Mitsubishi
Corporation is among Lawson’s greatest
strengths. We will make the most of thispower as a source of both ideas andexecution capabilities with respect tothe value we offer customers. We make
optimal use of Mitsubishi Corporation’s
strengths, for example, in such areas as
our overseas store development, rawmaterials procurement and collaboration
with overseas brands such as GODIVA.
Mitsubishi Corporation’s support has
been essential, moreover, to suchbusiness reforms as our logistics
reorganization and the establishment of
Lawson Bank.
Lawson is itself positioned at theinterface with customers, of course,
grasping their needs and considering
ways to meet them. Our most significant
responsibility is to assess the variations
in orientation that differentiate thecustomers of individual franchise
stores, and to determine strategies
for responding to those variations.
The underpinning for these activities isprovided by our strong, stable logistics
and manufacturing bases as well as ouroverseas network.
Going forward, we will leveragethese formidable partnerships toeven greater effect in such new fields
as financial services and overseas
expansion, in addition to our productdevelopment and raw materials
procurement, as we continue to push9
LAWSON INTEGRATED REPORT 2019

forward with our speedy businessdevelopment. Drawing on the resourcesof the Mitsubishi Corporate Group,
Lawson will maintain its unique characteras a listed company at the interface withcustomers and seek growth by focusing
on its stores.
We invite you to follow Lawson's
rapid progress as the future unfolds.

Strategy for Sustainable Growth
Message from the CFO

We will invest to support and build stronger relationships with ourfranchise stores in order to increase dividends in the short term byrecovering profitability.
Review of fiscal 2018

Satoshi Nakaniwa
Member of the Board
Senior Vice President, CFO

FY2018 (to Feb. 2019) results and FY2019 (to Feb. 2020) forecast(Unit: Billion yen)
(Fiscal year)
Gross operating
revenues
OperatingincomeRecurringincomeNet income

2017

2018

YoY

2019
(Forecast)

YoY

657.3

700.6

+6.6%

727.0

+3.8%

65.8

60.7

−7.7%

60.8

—

65.1

57.7 −11.4%

54.5

−5.5%

26.8

25.5

18.0 −29.6%−4.6%

Fiscal 2018 marked the conclusionof our 3-year Group-wide 1,000-Day
Action Plan. We made the most of thisfinal year of the Plan by conducting
a major overhaul of our supply chain
to reinforce the stores’ evening andnighttime operations. We also completed
installation of the new POS cash registers
with automatic change dispensers in all
our stores in Japan as a labor shortage
countermeasure.
A look back over fiscal 2018 showsthat we strengthened our evening andnighttime operations through suchmeasures as expanding our lineup of
appropriate products such as rice balls
and boxed meals and adjusting the
supply chain to meet new demand fromhomemakers and seniors. These efforts
resulted in increased sales. At the sametime, however, severe competition fromsuch businesses as other convenience
stores, restaurants and drug stores
prevented us from improving sales to ourcore convenience store customers. Salesby existing LAWSON stores in Japandeclined by 0.5 percentage point fromthe year before as a result.
Lawson opened 1,067 stores andclosed 400 in its domestic convenience
store business in fiscal 2018 for an
increase of 667 stores to 14,659 storesnationwide. We continued to expand ourChinese operations, moreover, increasing
the number of overseas stores by 614 to

2,210 stores. This expansion of the store
networks in Japan and overseas resulted
in consolidated store sales of 2,424.5
billion yen (up 6.2% from the previousyear) and gross operating revenues of
700.6 billion yen (up 6.6%). Both figures
were improved from the previous year.

Reduced profitability due toinvestment for growth
Consolidated operating income for theyear registered an anticipated declinewith respect to our earlier plan, however,as a result of initiatives implemented toassure sustainable growth, including
investment of some 4 billion yen in nextgeneration systems and expenses ofapproximately 2 billion yen incurred forthe establishment of the new Lawson
Bank business. In the area of nextgeneration systems investment, weenhanced our operating efficiency bycompleting the planned introduction of
new POS cash registers. As concerns
Lawson Bank, meanwhile, we acquireda banking business license in August
2018 and initiated banking services forcustomers in October. Advertising andpromotional expenses associated with
the Bank’s opening and costs related
to the introduction of new software
contributed to the aforementioned
downturn in profitability.
Among other consolidated
Group subsidiaries, our Seijo Ishii and

10
LAWSON INTEGRATED REPORT 2019

entertainment businesses continued toenjoy steady growth, and our overseas
operations registered significantly
improved earnings. Due to these andother factors, consolidated operating
income declined by 5.0 billion yen fromthe previous year to approximately 60.7
billion yen (down 7.7%). As concerns
consolidated net income, meanwhile,
although impairment losses by thestores increased, the positive impact ofappropriation of an IT system impairment
loss in the previous fiscal year
contributed a relatively limited year-onyear decrease of 1.2 billion yen to 25.5
billion yen.

Fiscal 2019 forecast and Groupwide growth
The Company’s business environment
remains austere, with a tight labormarket, rising labor costs and intensifying
competition across industries. In thedomestic convenience store business,efforts to support our franchise stores
under the Group-wide 1,000-Day
Action Plan implemented in 2016 will be
extended through 2019.
Our business plan for fiscal
2019 is designed to respond to therapidly changing social environment by
anticipating expenses and supporting
the franchise stores through such means
as optimizing the efficiency of store
operations and investing in labor-savingsystems to secure operating income of
60.8 billion yen, largely unchanged fromthe year before.
We plan to limit the number of
new store openings to 700 with theaim of improving our store quality
further, moreover, while disposing ofunderperforming stores and replacing
them with more profitable stores toenhance our overall franchise store
profitability. We intend to close 700
stores as well, thus avoiding any net
increase in the number of stores.
Consolidated operating income
is expected to remain unchanged fromfiscal 2018. Factors determining theCompany’s performance will begin
with an anticipated upturn in sales byexisting LAWSON stores of 0.5% and
an improved gross profit margin of
0.2%. We also expect the disposal ofunderperforming stores to contributeto improved profitability. At the sametime, however, expenditures in supportof the franchise stores, including system
investment to update their computers,
can be expected to rise. We project
downturns in consolidated recurring
profit of 3.2 billion yen to 54.5 billion yen
and in consolidated net income of 7.5
billion yen to 18 billion yen, moreover,due to higher losses stemming fromstore closures.
In businesses other than ourdomestic convenience store operations,
our new financial services arm

Lawson Bank will continue to develop
infrastructure to support its bill paymentbusiness centered on ATM services,which is progressing steadily in concert
with the cashless society. Our overseas
businesses will seek to expand the scaleof their operations in the medium to longterm, led by our Shanghai subsidiaryin China. We will promote Group-wide
growth, meanwhile, beginning with
Seijo Ishii, whose specialty products
have generated steady growth, and ourbusinesses in the entertainment field.

Maintaining financial soundness
and returns to shareholders
Finally, Lawson’s annual shareholders’dividend for fiscal 2018 will remainunchanged at 255 yen per share. We
have, however, adopted a new dividend
policy for fiscal 2019. Having identified
the return of profits to shareholders as
an important management issue, theCompany has paid stable dividends inrecent years. Going forward, however, we
will implement a policy of returning profits
appropriately in response to our businessresults in the interest of maintaining
financial health. We plan to clarify the
distribution of profits to shareholders
by introducing a “consolidated dividend
payout ratio” as a cornerstone of ourdividend policy. Without averting our
focus from shareholders, we will continue
investing to achieve sustainable growthby supporting our franchise stores andsecuring their profitability, while realizing
the highest dividend possible within therange of a consolidated dividend payout
ratio targeting 50% and a minimum
annual dividend of 150 yen per share.
In fiscal 2019, we will concentrateon supporting our franchise storesand further strengthening relationships
with our franchise owners, thus raising
Lawson’s corporate value through mutual
consideration and mutual prosperity with
our owner-operated franchise stores ina concerted effort to recover profitability
from fiscal 2020 forward, and to realize
an early increase in dividends.

Transitions in cash dividends per share and dividend payout ratio
Cash dividends per share (left axis)
Dividend payout ratio (right axis)
(Yen)

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

240

73.4

245

78.1

250

255

255

95.1

99.7

(%)

150
120

150

90

83.4
60

68.7

30

2014

2015

2016

2017

2018

2019 (FY)0(Forecast)Fiscal 2019 Consolidated operating income(Billion yen)

Approx. +2
Approx. +4

60.8

Positive impact ofimproved daily
sales and grossprofit margin

Impact of closing
low-profit storesConsolidated
subsidiaries

Approx. -4
IT costs(replacement of
store computers,
etc.)

Approx. -2
Various measures*

60.8*Main measures against labor shortage
・Replacement of MACHI café machines(Introduce self-service MACHI café machines)
・Expand stores with smartphone payment options
・Introduce self-service FF counters, etc.

FY2018
Consolidated operating income

11
LAWSON INTEGRATED REPORT 2019

FY2019Consolidated operating income(Estimated)Our Sustainable Growth
Lawson’s Corporate DNA

From being the handyman in the community to being a role of social infrastructure,
Lawson is aiming to become a “Hot Station (Best Relief Hub) in Our Communities”— Lawson’s history of continuous innovations and challenges, responses to which include incorporating community voices to achieve its corporate philosophy —Since its establishment, Lawson has responded proactively to changes in society, regularly identified customer needs, and developed new products and services.
Lawson, which started as a handyman in the community, is now a component of infrastructure in the society.
2001
To ensure its position as an essential part of the community that provides support for residents, Lawson is determined to
Established a joint ATM management company “Lawson ATM Networks, Inc.”
continue pursuing and advancing the “Hot Station (Best Relief Hub) in Our Communities” from the customer’s perspective.

1983

Started copying and printing services

1975

Opened the first
LAWSON store
in Sakurazuka,
Toyonaka-city,
Osaka

Started third-party bill settlement services
for the payment of electricity and gas bills

1991

Launched “Kara-age-kun(fried chicken nuggets)”

Opened first “NATURAL LAWSON” store

Launched “Lawson Ticket” service

1989

1986

2001

1996
1996

Opened the firstoverseas store in
Shanghai, China

2002

Launched “Onigiriya”- the new rice ball brand1998

Introduced “Loppi”
multimedia terminals to allstores2003

Started 24 hour/day operations

Opened the first “LAWSONSTORE 100” store

Established “postboxes” in
LAWSON
storesnationwide

Started third-party billsettlement services forthe payment of phone andwater bills

1977

2005

Social infrastructure
Handyman in the community

1975/6

Started environmental activities
Started social contribution activities
Disaster preparedness

1992
Set up store donation
activity

Launched a full-scale food recycling

1995
The Great Hanshin Earthquake
Donation fund1997
Announced the Declaration ofCommitment to Clean rest room

1994

2001

1998

1999

ISO14001 certification

Stopped including chopsticks
spoon, or fork in boxed meals

Individual Store Campaign

Introduced store uniforms
made out of at least 50%
recycled PET

Joined “Arakawa River clean Aid”

2000
Mt. Fuji forest inprovement
project

12
LAWSON INTEGRATED REPORT 20192006
 	Agreementwith Ministry ofEnvironment	Started recycling
waste oil in all
stores2003

2005

 	First Comprehensive regional agreement with Wakayama
Prefecture in Japan 	Opened the first store offering prescription medicines

Publicize corporate privacy
policy2009

Launched “L-Chiki (fried chicken)”

2014

2018

Acquired supermarket chain
SEIJO ISHII CO., LTD.

Launched the operationof Lawson Bank, Inc.

Seijo Ishii

Lawson Bank2010

Launched the “Ponta” common
point program service

2014
2010

Established the
LAWSON Farm

2011

UNITED CINEMAS

New Lawson Declaration2018

Lawson strives to be a

Launched the LAWSONFRESH PICK service“Hot Station (Best Relief Hub) in Our Communities”
for everyone by offering
the three “Whew!” Surprises.

Established Lawson HMVEntertainment, Inc. (currently
Lawson Entertainment, Inc.)
Acquired UnitedEntertainment Holdings
Co., Ltd. via Lawson HMVEntertainment, Inc.

Three Promises

Superior
taste

2019/2

2010

Opened first eco-friendly
model store“Whew!”

2008
Set own action targets for reducing
CO2 emissions

2007
Started “Bring YourOwn Bag campain”

discoveries

2012	Installed solar power systemon the roofs of approx. 2,000
stores	Launched bran bread that
contains grain husks
	Started mobile sales offood products and daily
necessities

2011
Set up “Support Dreams Fund”(Scholarship Program for victims of
the Great East Japan Earthquake)

2015

2017

Selected for the 2015 Health &Productivity Stock Selection (threeconsecutive years 2015–2017)

Set up the “Support Dreams Fund”(Scholarship Program for children
from single-parent families)

2014

2016

Selected as a Nadeshiko Brand (fiveconsecutive years 2014–2018) /Opened an on-site childcare facility
Happy Lawson Nursery

Obtained the Resilience Certification

13
LAWSON INTEGRATED REPORT 2019

Environmental(Machi)friendliness

Three “Whew!” Surprises for the Three Promises
Surprise

Commenced full-scale efforts to reduce CO2 emissions
Promoting the growth of consumer health consciousness

Humankindness

Surprise“Whew!”
happiness

Surprise“Whew!”
kindness

Corporate Value Creation Cycle and Initiatives for SDGs
Corporate Value Creation Cycle

Lawson contributes to happiness and harmony in its communities by creating added
value through its customer-oriented business model.
Lawson will continue to increase its corporate value by leveraging its unique customer-oriented business model as a Manufacturing Retailer Based on a Small Commercial Area
model. This means meeting daily life needs and achieving high store productivity while executing appropriate management strategies. Lawson’s business model is designed
to increase both its visible capital, including physical assets and funds specified in the financial statements, and its invisible but tangible capital, such as human capital andinformation, through appropriate investment in these areas. Lawson will strive to honor its three promises and make contributions to society as an indispensable part of thecommunity by repeating its corporate value creation cycle.

Social challenges Lawson is tackling
Declining labor force (Employed people aged 15 to 64)
Projected rate of decline
by 2025 compared with 1990 Approx.

20% decrease

Source: “Population Census,” Ministry of Internal Affairs and Communications for data up to 2015
(excluding people of unknown age); “Future Population Projections of Japan (projection as ofJanuary 2012)” (projection of medium variant births (deaths)), National Institute of Population andSocial Security Research for data after 2020in the population of
Rapidly aging society (Increase
residents aged 75 or older)

3.6 times

Source: “Population Census,” Ministry of Internal Affairs and Communications for data up to 2010;“Population Projection for Japan,” Ministry of Internal Affairs and Communications for 2015 datain the number of
Empowerment of women (Increase
double-income households)
Compared to 1991 Approx.

1.4 times

Source: “Annual Report on Health, Labour and Welfare,” Ministry of Health, Labourand Welfare, “White Paper on Gender Equality,” Cabinet Office, “Special
Survey of the Labour Force,” Ministry of Internal Affairs and Communications,“Labor Force Survey (detailed tabulation),” Ministry of Internal Affairs andCommunications

Rise in medical expenses
Projected rate of increaseby 2025 compared with 1990 Approx.

2.9 times

Sources: “Annual Report on Health, Labour and Welfare 2011,” Ministry of Health, Labourand Welfare for data up to 2009; “Future Outlook for Medical Expenses andEstimate of Financial Impact,” Health Insurance Bureau, Ministry of Health,Labour and Welfare (October 25, 2010) for data after 2015

Worsening food and plastic waste problems
Food waste
in 2016

6.43 million tons Plasticinwaste
2013 9.4 million tons

Source: Announcements by the Ministry of the Environment: Estimated Food Waste inJapan in FY2016 (April 2019) and Plastics Smart Campaign (January 2019)

Rise in average global temperatures(Long-term global goals
Compared with thedetermined by the Paris
Agreement of December 2015) pre-industrial era

InputsFinancial capital (funds)
Capital raised to fund business activities through sales ofshares and borrowing

Manufacturing capital (IT and infrastructure)
Necessary tangible assets for conducting business activities,
generally referred to as “infrastructure,” including land,buildings, machinery and IT

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

Social capital (resources and social norms)
Natural resources, social norms, and relationships of trust
established with stakeholders

2˚C or less
14
LAWSON INTEGRATED REPORT 2019

Meeting daily
life needs

Capital allocation based on returnon investment (ROI)

Projected rate of increaseby 2025 compared with 1990 Approx.

Next-Generation
LAWSON Convenience
Store model

Corporate
strategy

Customeroriented
Achievinghigh store
productivity

Developing
human capital

A Manufacturing
Retailer Based on a
Small Commercial
Area

Innovation

Franchise(FC) system

Compliance and risk
Corporate governance
Environmental management system (EMS)Outcomes
Lawson aims for deliciousness
in side dishes and boxed
meals, frozen foods, andsweets. We also offer services
designed to increase youreveryday joy, thus helping
make life more “delicious.”Superior
taste

OutputsHumankindness

Beyond conventional products,
Lawson sells pharmaceuticals
and private brand products in
response to the growing
health-consciousness andfood safety concerns ofsociety. Additionally, we arecommitted to providing a
supportive environment forevery member of the Lawson
family.

Environmental(Machi)friendlinessAs part of our goal ofprotecting not only the local
environment where Lawson
stores are located but also
global, Lawson promotes
various cooperative initiatives
with customers.

Nurturing human resources who are
self-motivated and innovative to satisfy local
community needs appropriately
Cultivating innovation based on prompt
perception of changes in local communities

Contributing to communities as social
infrastructure in careful consideration ofsociety and the environment

Suppliers/
business
partners

Store crew(Part-time andtemporaryworkers)

Local
communities
FranchiseownersEmployees

Investment determined according to capitaldiscipline to meet the expectations of theequity market
Leveraging the full supply chain to develop
products that meet local community needs“Creating Happiness and Harmony
in Our Communities”

15
LAWSON INTEGRATED REPORT 2019

Shareholders

Customers

The Sustainable Development Goals (SDGs) were adopted at the United Nations
Sustainable Development Summit in September 2015. The summit set 17 goals,
such as No Poverty, Good Health and Well-being, Quality Education, and Climate
Action, and 169 targets to achieve the SDGs on a global scale by 2030. Through thepledge to “Leave No One Behind,” each nation is working toward solving the issues.
At Lawson, we are proactively promoting SDGs initiatives as part of our aim to achieve
our corporate philosophy of “Creating Happiness and Harmony in Our Communities.”

Corporate Value Creation Cycle and Initiatives for SDGs
Initiatives for SDGs

Engaging with the SDGs
Identify Lawson’s Material Issues, and Promote Sustainable Initiatives to Realize Its Future Vision

In March 2019, we established the “SDGs Committee” aiming to realize asustainable society through Lawson’s business activities, and have conducted initiatives leading to solutions for social issues one by one througha step by step approach. While each division spontaneously works torealize the “Three Promises” through their business activities, we promote
initiatives linked to “SDGs,” and periodically come up with solutions forchallenges and report on progress through the “SDGs Committee.” Whilethe committee takes the initiative in fulfilling our social responsibility bysolving social issues step by step, we continue striving to enhance ourcorporate value and achieve sustainable growth.

Steps to Identifying “Material Issues”

1

STEP

2

STEP

3

STEP

4

STEP

In order to find issues with heavy impacts on the environment,
society and economy, and then identify Lawson’s own “material
issues,” we categorized our business activities into value chain
phases such as raw materials procurement, manufacturing,
distribution, etc., and confirmed what initiative was helpful
toward achieving each target or goal of the SDGs by clarifyingsocial issues in every phase.
From the social issues spotted in the feedback or questionnaire
results from stakeholders such as customers, franchise stores,
shareholders, and institutional investors, we selected theissues with heavy impacts on the society.

High

Matrix -Impacts of Identified Social Issues Plotted on Graph istribution of safeDand secure products

Large-scale disaster

Ultra-aging society
Diversity of human capitalP rogress of technologicalinnovation

Declining
birthrate eclining laborDforce
Issues of 24-hour
operations
Intensified climatechange egeneration and depopulation
Din local communities
Massive use of natural resources hanging role of the familyCin the societyIncreasing health consciousness

 eterioration ofD
ecosystems

Water pollution/shortageE xacerbated economic
inequality

S ustainable primary industry (Agriculture,
forestry, and fisheries sector)

Superior tasteH uman kindness
Environmental (Machi)
friendliness

ModerateCompliancePlastic waste issues
Food loss

 evelopment of a stableD
supply chain

Cross-checking the social issues identified through stakeholder
feedback with those impacting heavily on Lawson, we
prioritized those necessary for us to become a “Hot Station (Best
Relief Hub) in Our Communities.”
We linked Lawson’s initiatives for the specified social issues tothe “Three Promises,” and decided our material issues.

Job satisfaction reform

Impact on Lawson (Impact level)

Sharing issues faced and progress made toward their solution
at the SDGs Committee

Identifying Material Issues

Moderate

Based on our corporate philosophy “Creating Happinessand Harmony in Our Communities,” we promote customeroriented business activities aiming to become the “Hot Station(Best Relief Hub) in Our Communities.” Believing that striving
to realize the “Three Promises” eventually promotes the“Sustainable Development Goals (SDGs),” we aggressively
address our challenges.

Impact on Society (Impact level)

High

Placing the SDGs Committee at the core, we work together on a company-wide basis to realize a sustainable society alongside the continued growth of the Group
Since its founding, Lawson has spotted from the social
issues the needs of customers living in communities,
and strived to provide them with affluent lives. This
attitude never changed even after we entered the new
era of “Reiwa.” However, the society and the customers’
spending behaviors as well are increasingly changing rapidly. Also, the influence of convenience
stores on society has increased since they have been recognized as one of the indispensable
social infrastructures. As a result, the number of social issues we are required to address isdramatically increasing. We keenly feel that from the perspective of stakeholders such as
customers and franchise stores, Lawson is required to step ahead of anyone else toward thefuture while promoting its business activities as a member of the society.
The goal of Lawson’s corporate philosophy, “Creating Happiness and Harmony in Our
Communities,” is to create a community where all people can lead happy lives, which leads to

the SDGs keyword: “Leave No One Behind.” We believe that it will be helpful for the promotionof the SDGs if all engaged at Lawson sincerely address each of the challenges faced in realizing
the “Three Promises” through their own work in pursuit of our new corporate slogan that we
declared this fiscal year: “Hot Station (Best Relief Hub) in Our Communities.”
For the purpose of always facing new social issues
SDGs Committee Organization
and responding to them in an agile and appropriate
Supervisory
Board of Directors Audit &Board
manner as Lawson, we set up the SDGs Committee thisExective Committee
President
fiscal year.
Meeting
Placing the SDGs Committee at the core, we work
Secretariat
SDGs Committee
together to realize a sustainable society and continued(Held on a quarterly basis: All Division Directors)
growth through our business activities on a companywide basis going forward.
SDGs Promotion Group Meeting(Held on a monthly basis: General Managers and higher)

16
LAWSON INTEGRATED REPORT 2019

Shuichi Imagawa

Executive Managing Officer
Compliance & Risk Management, Human
Resources, SDGs Committee Chair

Lawson’s Material Issues• Based on our business policy the “Three Promises,” we classified our value chain-related initiatives into six categories taking into account social issues and conditions.
•	We decided our material issues from customers’ standpoints emphasizing our initiatives as an organization responsible for safe and secure social infrastructures, which is
the most important role for a retailer.
Business Policy

Superior
taste

Surprise “Whew!”
discoveries

Applicable SDGs

Material Issues (Materiality)

Major Initiatives and Services

Providing Safety/Security-Oriented
Overwhelmingly High Value-Added
Products and Services Friendly toSociety and the Environment	Providing high value-added private brand (rice, frozen foods, and fast foods)
	Deployment of Machikado Chubo
	Planning and developing locally-produced products for local consumption, andspontaneously utilizing domestic ingredients	Developing and selling products under consideration of the society and the environment(MACHI café, Natural Lawson Brand, etc.)	Deployment of LAWSON Farms (Nakashima-method/GAP Certification)
	Developing and operating stable supply chain including manufacturing and distribution
	Conducting fair trade with suppliers (Establishing purchasing policy)

Supporting Health Promotion for
All People Through Products andStores	Developing low-sodium/additive products	Changeover to easily understandable nutrition facts
	No use of preservatives and artificial colors
	Selling products and medicines considerate of health	Expansion of NATURAL LAWSON and HealthCare LAWSON	Executing health promotion agreements with local governments
	Supporting and subsidizing health initiatives for store owners and crews
	Promoting health and productivity management (Promoting employees’ challenge forhealth)Providing Comfortable Work
Environment Leading to Job
Satisfaction

	Promoting the adoption of store equipment for a comfortable work environment (Laborsaving by innovations)	Expanding the corporate award system (Training store crews and increasing retention rate)	Providing staffing service for stores and training for foreign national crews (Lawson Staff)
	Promoting MO system for multiple-store management	Enhancing communication with franchise stores (Establishing franchise store advisorycommittee and “Owner Hotline”)
	Promoting job satisfaction reform (Improving work/life balance)	Operating Happy Lawson Daycare Center (Tokyo)	Improving maternity, childbearing, and nursing leave system and encouraging the use of
the system

Humankindness

Surprise “Whew!”
happiness

Supporting Women, Senior People
as well as Children’s Growth

Environmental(Machi)friendliness

Surprise “Whew!”
kindness	Maintaining Single Parent Family Support Scholarship Fund System
	Promoting fund-raising programs to assist children to learn (School afforestation projects,
Dream Classroom, etc.)
	Promoting support for experience-based learning facility “Student City” (Kyoto/Sendai)	Accepting elementary and junior high school students participating in workplace
experience programs and conducting on-site workshops
	Deployment of “Care-focused LAWSON for Senior Citizens” program (Nursing Support)	Promoting Safety Station (SS) activities (Community watch service for women, children,and senior people)

Coexisting Synergistically with
Communities by Serving as Part ofSocial Infrastructure	Mobile sales, delivery services, and LAWSON FRESH PICK (Loppick)	ATM services of Lawson Bank	Government certificate issuance services
	Executing comprehensive regional agreements with the local governments
	Drawing up the Business Continuity Plan (BCP)	Supporting disaster-stricken areas in collaboration with national and local governments(Acquisition of the “Resilience Certification”)

Sustainable Environment
Preservation Activities Toward
Carbon-Free Society	Promoting energy efficient stores (CO2 reduction) (Introducing and operating energy
efficient equipment)	Utilizing and spreading renewable energy (solar power, etc.)	Efficiency enhancement of distribution and promotion of changeover to environmentfriendly trucks (CO2 reduction)
	Promoting food waste reduction (food recycling, etc.)	Reducing plastic used for plastic shopping bags and containers and packaging

17
LAWSON INTEGRATED REPORT 2019

Goals for2030 (KPI)
Setting KPIs for social
environment taking into
consideration social
issues and conditions

Reducing food waste

Reduce by

Lawson’s Vision 2050

Take on more difficult challenges!!

Lawson Blue Challenge 2050!
Save our blue planet!
We take on difficult challenges to achieve higher
goals so that we can create a carbon-freesociety and contribute to the ideal world that theSDGs aim to realize.
Reducing food waste

50%

Reduce by

v. 2018 levels
Reducing plastic
Plastic for containers andpackaging

Reduce by100%	Reducing plastic (for containers
and packaging)
Lawson’s original products
Eco-friendly materials

100% used

30%
v. 2017 levels
Lawson’s original products
Eco-friendly materials

50% used

Reducing CO2 emissions
CO2 emissions per store

Reduce by

100%

Plastic shopping bags

Reduce by100%

Reducing CO2
emissions
CO2 emissions per store

Reduce by30%
v. 2013 levels

We examine and discuss what
we should do now by focusing on“Lawson’s Vision 2050,” and looking
back on what we have done so far
to steadily proceed with our material
issues and KPIs for the SDGs
(Sustainable Development Goals tobe achieved by 2030).

Resolving community problems and providing unique value

The Lawson Group is bringing smiles to faces throughout the community
Convenience stores have taken root in the lives of the people, supporting them in every aspect of their daily lives.
Because we want every customer’s shopping experience to be filled with joy and new discoveries, we make sure they can find nearly everything theyneed at LAWSON, from foods to daily necessities, and even banking and entertainment services, no matter how early in the morning or late at night.
In our desire to become a community lifestyle platform that makes every customer feel at home, we are honoring our “Three Promises” by creating the
Next-Generation LAWSON Convenience Store for the new Reiwa era.

The bread section is
like a bakery offering
delicious breads day
and night!

Superior
taste

The Three Promises

They are constantly
introducing the mostwonderful new sweets
and desserts!

LAWSON’s clear
product labeling helps
us control our daily
intake of food additives,
sugar and salt!
Carefully selected
Japanese rice makes
LAWSON’s rice balls
unimaginably delicious!

The stores are so clean
and friendly, we canhardly pass by one
without dropping in!

Humankindness

Environmental(Machi)friendliness

LAWSON ATMs

LAWSON stores (in Japan)

13,459 machines

14,659 stores

SEIJO ISHII

146 stores

Machikado Chubo
in-store kitchens*	Stores operated directly by SEIJOISHII, CO., LTD.

5,495 stores

18
LAWSON INTEGRATED REPORT 2019

We’re delighted to knowthat LAWSON stores’
food waste reduction
program supports
childcare, too!

Oh-oh! I must havecaught a cold. Luckily, myneighborhood LAWSON
stocks medicines, too.

I think I’ll stop at
LAWSON on the way
home to pick up somebeer or wine, andmaybe some snacks togo with it.

Q

Quality

I just found out that
MACHI café has
switched to iced coffee
cups made of paper!

LAWSON’s Loppi
multimedia terminals
issue tickets foreverything from events
to live concert—and even
theme park—right on the spot!

I love the convenience ofordering meal sets andfresh foods by smartphonein the morning, and picking them up at LAWSON
as early as the same day!

S

ServiceC

Cleanliness

Lawson’s The Three Essential Practices Q (Quality) x S (Service) x C (Cleanliness)
Lawson has adopted the three essential practices as the basis for its store
operation policies to enhance the stores’ popularity among customers.
These pledges go beyond the conventional meanings of quality, service
and cleanliness. They refer to 1) a product lineup that meets the needs of
shoppers and brings them pleasure; 2) warm, attentive customer service
that makes everyone feel at ease; and 3) cleaning activities that keep not
only the stores’ interiors but also their surrounding communities clean
and comfortable. Headquarters has implemented a number of initiatives
to promote realization of our 3 Pledges. These include guidance by store
management supervisors (SVs) and a mystery shopper program under whichinvestigators visit stores incognito and evaluate them from the customer’s
perspective.

I enjoy adding items
such as frozen foods andvarious daily necessities tomy shopping basket alongwith fresh vegetables.

Creating Happiness and Harmony in Our Overseas Communities
Lawson’s careful attention to its communities extends beyond Japan’s borders as well. We are
implementing Area FC (“regional franchise”) development in various regions of China by opening newstores one after another. In fact, our operations in Shanghai and Dalian both achieved profitability in fiscal
2018. This has brought new convenience to the lives of many community residents in China. We are also
continuing to expand our store networks in other Asia-Pacific countries, including Indonesia, Thailand andthe Philippines. There were 2,210 LAWSON stores serving customers overseas as of end February 2019,
and we are targeting an increase in this number to about 5,000 sometime after 2021.

HMV

56 stores

Shenyang*2
Beijing
DalianLAWSON stores selling
Over-the-counter (OTC) drug

206 stores

Wuhan

UNITED CINEMAS

367 screens

Chongqing

19
LAWSON INTEGRATED REPORT 2019

Shanghai

Changsha*1

Thailand* Figures for Lawson services are as of end February 2019.

Hefei

Philippines*1 First store opened June 2019
*2 First store opened August 2019

Indonesia

HawaiiSuperior
taste

Current CHALLENGE

Making daily meals tastier and abundantly enjoyable
CHALLENGE

1

To contribute to more delicious living
Enriching our lineup with better-tastingoriginal products
At Lawson, we concentrate our efforts on planning anddeveloping original products to ensure our customers’ ability toobtain delicious foods every day from a nearby LAWSON store.
Our product development employs analyses of purchasing data
gathered from Ponta Point Cards as well as feedback obtained
through social media. Our insight into customers’ lives enables
us to provide them with incomparable good tastes from morning
to night.
In our pursuit of delicious taste, we select only the finestquality ingredients for our original products. Our sandwiches
are made with specially developed sandwich breads and filledwith tasty ingredients, and our noodle dishes are preparedwith carefully selected noodles, soup stocks, raw materials
and preparation methods to assure unexcelled excellence. The

Lawson bakery has crafted a new Machi-no Pan (“community
bread”) series with painstaking care for textures and ingredients.
Sales of our Kara-age Kun (fried chicken nuggets) introduced
33 years ago have surpassed 3.1 billion servings, and our
new unprecedentedly smooth, rich BASCHEE Basque-stylecheesecake has scored another enormous hit, selling over
13 million slices in just two months. Kinshari onigiri rice balls
featuring a blend of Niigata Koshihikari rice with other domestic
rice varieties wrapped in tasty nori seaweed has also achieved
immediate popularity. Some 5,500 LAWSON stores nationwide
are now preparing meals on site in Machikado Chubo in-store
kitchens. Dishes such as freshly cooked white rice and thicksliced pork cutlets deep-fried right in the store offer delicious
tastes possible only with home cooking.
Our widely varied lineup of original LAWSON products now
accounts for about 40% of total sales by the stores.

The LAWSON SCM-CRM Model
Product
development

High added
value rawmaterials
procurement

SCM

Visualizationof opportunity
loss

CRM

Supply chain
management

Customer
relationshipmanagement

Manufacturing
and logistics

Optimized
product
lineupOrder
planning

Charcoal-grilled pork rice bowl
BASCHEE— Basque-style cheesecake —4-variety frozen fruit bar packKara-age Kun
RegularFROZEN PARTY
strawberry dessert

Akuma-no (“devilishly
delicious”) onigiri rice balls

A grilled salmon Kinshari
onigiri rice ball

The LAWSON SCM-CRM Model facilitates development of delicious,
highly appealing products and product offerings from the customer’s
perspective. It uses Ponta Point Card members’ personal attributes(gender, age, region of residence, etc.) to analyze their purchasing
behavior, visualize expected opportunity loss (missed sales) andconduct order planning. This analysis also contributes to food waste
reduction. CRM activities provide the driving force for increasing
sales and profitability by helping us to understand our communities,
stores and customers better.

20
LAWSON INTEGRATED REPORT 2019

Double-cream squarebuns

Machikado Chubo in-store kitchen
delicacies

Pearl barley & walnut milky
cream buns

Store development in pursuit of superior
taste
Demand for delicious, affordable frozen meals that can becooked easily in a microwave oven is increasing among
working women and seniors who live alone. These products areenvironmentally friendly, moreover, since they generate minimal
food waste.
The taste of Sanuki udon, a popular frozen noodle productin the LAWSON Select private brand series, was improved inspring 2019 with a switch to the use of domestic wheat in its
manufacture. Rice dishes are another perennial favorite frozen
food. Enhancement of our incomparably delicious frozen foodlineup will continue into the future.
In addition to frozen foods, LAWSON stores respond to
demand for prepared meals to meet individual needs with suchdelicacies from the fast-food counter as croquettes and minced
beef cutlets, now established as staple side dishes for thedinner table, as well as a popular line of Cup Sozai snacks toaccompany evening drinks.
We are also introducing self-service display cases thatenable customers to select their own ready-to-eat dishes.

The Machi-no-pan bakery series developed by
women to appeal to wide-ranging customers
Launched on March 5, 2019,
Machi-no-pan is a new series ofdelectable bakery items offering
choices to suit the tastes of every
hungry customer. Developedby a team reporting directly to
the President and designatedas a “Freethinking Bakery Creation Task Force,” theproducts reflect the goal of breaking with theconventional image of “packaged convenience
store bread.”
Cheese! Cheese
The team comprises four women fromBoulevarious Lawson departments. Their innovations
cover a broad range, from breads with crispy,
chewy textures to breads packed with delicious
fillings, and even breads that go nicely withwine, all developed to generate the excitement
French toast madeof visiting a popular bakery in town.
with 2 slices ofFrench breadFried rice

I suggest ideas basedon my experience in aregional merchandising
department.

I look for delicious
breads that bringsudden smiles topeople’s faces!

I draw on mysupervisory experienceand reflect feedback
from the stores!

I envision a bakery
section that always
provides customer
satisfaction.

Shrimp pilaf

Tohoku Merchandising Dept.

Yoshiko Ishibashi

Sanuki regional specialty
udon noodles

Natural Lawson
Merchandising Dept.

Aika Kobayashi

Products Planning Dept.

Daily Foods Dept.

Kasumi Fukui

Ayako Murata

The Free-thinking Bakery Creation Task Force

21
LAWSON INTEGRATED REPORT 2019

CHALLENGE

2

To satisfy a diverse range of personal preferences
NATURAL LAWSONLAWSON STORE100SEIJO ISHII

Contributing to more
beautiful, healthy andrelaxed lifestyles

Providing good value
centered on 100-yen
food products

A high-end supermarket offering acomplete assortment of specialty foods

The NATURAL LAWSON chain, which
has expanded to 143 stores nationwide(as of July 2019), serves a customer
base comprising people who insist
on daily life products oriented toward“health and beauty,” “seasonality” and“safety and reliability.” The pleasantstore interiors assure a relaxed shopping
experience. Customers rely on NATURALLAWSON for carefully selected delicious,
healthful foods and environmentallyfriendly detergents and cosmetics. Theyfind that its commitment to excellence
provides them with exceptional value.

With its 790 stores nationwide (as ofJuly 2019), LAWSON STORE100 offers
three types of value to meet the needs ofsingle people, homemakers and others:a wide selection of products similar to
those available in supermarkets; theaccessibility of a convenience store; andan easily understandable single price.
This “100-yen grocery store” offers
optimal value for money with products
distinguished by suitable volumes andsmall portions. Popular favorites include
fresh, good-quality fruits and vegetables
sourced from cooperating producers inregions throughout Japan.

Seijo Ishii offers a full assortment of appealing products handpickedwith unstinting selectivity from throughout Japan and aroundthe world. The 151 stores in the chain* (as of July 2019), mostcongregated in the Tokyo Metropolitan Area, have developed
a variety of formats, from street-side stores to shops in stationbuildings, department stores, shopping centers and office buildings.
The “grocerant,” which fuses dining with shopping, is a popular
new variant. Customers who insist on superior quality rely on Seijo
Ishii for a wide range of imported foods, select fresh foods and deli
items as well as for processed meat products prepared by skilledchefs in a central kitchen.
Seijo Ishii uses no preservatives, synthetic colorants,
or synthetic sweeteners in its original products. Its productdevelopment seeks to minimize the use of additives to enable
customers to enjoy the natural flavors of the ingredients.

Faithful ally of busy people
who require help withgrocery shopping

LAWSON FRESH PICKThe LAWSON FRESH PICK (Loppick)service enables customers to place orders
by smartphone app before 8:00 a.m.
and pick them up at a LAWSON of theirchoice as early as 2:00 p.m. the sameday.* The available selection includes
products that are not normally sold by
LAWSON stores, among them meal kits,
fresh foods, high-end ingredients from
Seijo Ishii and other specialty stores andvarious sweets and desserts. Alreadyserving customers at approximately 1,800
stores in Tokyo, Kanagawa and Chiba
prefectures, Loppick will be rolled out
nationwide in the future.
*The arrival time of ordered products varies
with the selected store.

*The 151 stores operated directly by SEIJO ISHII, CO., LTD. only

6:00 p.m.
Before8:00 a.m.
Order by smartphonein the morning.

Purchase at LAWSON
the same evening.

Original Lawson meal kits
Premium cheesecake Juicy domestic pork
dumplings (small)
Onigiri rice ballswith sticky barley
Edamame andsalted kelp

Sweet bean paste gipfeli

Fried chicken

Shredded cabbage

Pure-brewed
soy sauce

Entrance to a Seijo Ishii “grocerant”

22
LAWSON INTEGRATED REPORT 2019

Le Bar à Vin 52, a Seijo Ishii production
With a menu of tasty items made with Seijo Ishii
ingredients, Le Bar à Vin 52 wine bars serve fine foods andwines carefully selected by the parent store’s expert buyers.

Ready to eat in as little
as 10 minutes!
Now, anyone canprepare delectable meals. Kitchento
meal kits come with written preparation
instructions and the proper proportionsof all thenecessary pre- A Kitchento
menu item
cut ingredients,
so they can becooked right outof the package.
Chop suey with seafood

CHALLENGE

3

To spread happiness through wide-ranging entertainment and financial services
Proposals for a “delicious life”
Since the 1990s, Lawson has sought toenliven and enrich its customers’ lives
Ticketsby promoting entertainment-related
CDs &Books &
DVDs
magazines
services. Lawson Entertainment, Inc.,
which operates Lawson Ticket and
HMV & BOOKS, is strengthening its
Games ENTERTAINMENT Novelty
items
360˚
collaboration with Group members
United Cinemas Co., Ltd. and Lawson
TravelMoviesservices
Travel Inc. with the aim of becoming
Othersthe only comprehensive entertainment
company that meets customers’ allround entertainment needs.
Lawson also makes people’s lives more convenient andenjoyable with financial services provided by Lawson Bank, Inc. andvarious administrative services conducted in partnership with local
governments.

Convenient, value-added financial
servicesYour most accessible bank, with ATMs right in the store

Lawson Bank

In October 2018, Lawson introduced various new financial services withthe opening of Lawson Bank. Customers can conduct bank transactions
anytime using ATMs installed in LAWSON stores throughout Japan, or by PCor smartphone 24 hours a day, 365 days a year. The bank is currently issuinga variety of coupons for ATM users as part of a promotional campaign. The
closest, most easily accessible bank in the neighborhood, Lawson Bank ismaking life increasingly convenient forevery community resident.
In another new development,
customers earn added Ponta points when
they use the Lawson Ponta Plus credit
card introduced in January 2019 to makepurchases at LAWSON stores.

UNITED CINEMAS

Lawson Entertainment

LAWSON TICKET

Enhancing themovie-viewing
experience

Providing new experiences
through real-world retailstore shopping

Issuing tickets
any time of day at
LAWSON stores

United Cinemas, Japan’s third-largest
cinema complex provider, operates 42
theaters with 378 screens nationwide (asof July 2019). In June 2019, it opened atheater in Okinawa Prefecture equippedwith a state-of-the-art IMAX Laser*1
screening system as well as the new
4DX*2 and SCREENX*3 experiential andmulti-projection technologies. Besides
providing unparalleled entertainment
through enriched movie experiences,the company is leveraging the synergiesof the Lawson Group to develop a widearray of event-hosting operations.
*1	A screening system that adds 4K laser
projection and advanced 12-channel sound to
the IMAX movie experience*2	A technology that transmits movements, sights
and smells reflecting on-screen content toprovide a cinematic experience that transforms“watching” to “experiencing”*3	A panoramic multi-projection movie screening
system that uses the theater’s side walls aswell as its screen

HMV, now one of Japan’s largest
music and video software store
brands, entered the Japanese market
in 1990 and joined the Lawson Group
in 2010. The company operates
56 stores nationwide (as of July2019), most under the HMV brandencompassing HMV & BOOKS bookcentered multi-media stores andspecialized record stores as well as an
online retail component.
Lawson Entertainment’s otherconventional retail businesses include
merchandize sales at event venues in
conjunction with Lawson Ticket. It also
provides a flat-rate music-streaming
service HMV music, operates its
own music label, invests in animeand movie production, and develops
and produces entertainment-themed
merchandise.

This innovative ticketing service
provider occupies a major share ofJapan’s play guide industry, sellingtickets for concerts, sporting events,
theaters, cinemas and leisure facilities
through its Loppi multimedia terminals
in LAWSON stores nationwide and its
l-tike.com website. The company ispursuing efforts to expand its scopeof business further, by partnering with
China’s Alibaba Group to make visiting
Japan easier for overseas tourists,
for instance, hosting large-scaleoriginal events, and providing fan clubmembership agency services.

A multilingual screen

The LAWSON Ponta Plus credit card system

23
LAWSON INTEGRATED REPORT 2019

Humankindness

Current CHALLENGE

A “Hot Station (Best Relief Hub) in Our Communities” where smiles
CHALLENGE

1

CHALLENGE

2

Challenging better healththrough delicious products

To participate closely in thelife of every customer

Communicating human kindness throughproducts and services

Supporting healthy community living

Lawson’s product development focuses on products that
contribute to its customers’ health.
Our good-tasting, healthful prepared meals focus onfactors described by three keywords: “low-salt,” “low-carb”
and “reduced additives.” They include hearty pork cutlet ricebowls, lightly seasoned with dashi broth, and our Motto! Yasai(“more vegetables”) series of meals replete with vegetables.
Our bran bread series, which has won widespread popularity
extending far beyond customers concerned about carbohydrate
intake, was renewed for the eighth time in November 2018with a more luxuriant texture. The sugar content of LAWSON’s
recommended products is specified in the nutritional indications
on the package.
Seijo Ishii’s “desica” brand frozen Chinese meals are freefrom chemical seasonings, moreover, with a full flavor provided
only by their ingredients.

Seeking to become a leading regional health store, LAWSON
continues its efforts to support the lives of people in its
communities based on two central themes: “meal solutions”
that improve their physical health through daily eating habits and“self-medication solutions” that help those with health concerns
maintain their health by providing consultation services. Amongother “self-medication solutions,” 214 stores, have in-store
pharmacies, sell OTC drugs, and 48 out of which also serves
as dispensing pharmacies. These are especially appreciated bycustomers who want to buy medicines on their way home fromwork or during nighttime hours. A network of 21 care-focused
LAWSON stores operate nursing care consultation windows
and sell daily necessities and food products for senior nursing
care patients. In addition to these, 313 LAWSON hospital stores
located inside hospitals (as of May 2019) offer a reinforced lineup
of medical hygiene, nursing-care and rehabilitation supplies in
addition to standard convenience store products and services.

Evolution with health needs

Lawson’s Three Essentials for Health

2000

2010

2018

Early period

Period of creation

Period of growth

NATURAL LAWSON

Launch of bran bread (2012 onward)

Launch of Motto! Yasai(“more vegetables”) series(established 2001)(2018 onward)

Lifestyle diseases (excessive carbohydrate or salt consumption)
Needs for healthy life extension
Lawson’s Three Essentials for HealthLow salt

Low-carbs

Low additives

Launch of onigiri rice balls withsticky barley (2012 onward)
Expansion ofsoup product sales(2016 onward)

Launch of smoothie series (2015 onward)

24
LAWSON INTEGRATED REPORT 201930% (max.) reduced salt Use of bran (grain
content centered on
husks) to control
main normal diet staples carbohydrate intake

Chemical flavoringfree frozen foods(selected products)

brighten the faces of visitors and crews alike

Care-focused LAWSON for Senior Citizens
with in-store nursing care centers

Coffee beans sourced in consideration offarm workers’ working environments

Care-focused LAWSON stores for senior citizens with nursing careconsultation windows employ consultants such as care managers
to provide nursing care consultation services, while also supporting
seniors and their families
with an assortment of
products. The stores’
Community Salons,
where people of different
generations interact
freely, hold health checkmeetings, dementia
support workshops, andhealth and nursing carerelated events such as the A nursing care consultation window in a Carefocused LAWSON for senior citizens
Orange Café.

In its commitment to sound corporate activities, Lawson gives carefulconsideration not only to the communities in which its stores are located,but also to the environment and occupational health and safety of its
ingredients’ production regions as well as to their economies and societies.
The coffee beans used to brew coffee MACHI café coffee are grown on
farms with Rainforest Alliance Certification,* which is awarded to farms thatmeet rigorous standards for environmental preservation and improvementof farm workers’ living conditions. Arabica coffee beans from designatedfarms and production regions in five overseas countries are high-quality
coffee beans with a distinctive smooth, fruity taste. The cups of coffee
customers buy at their LAWSON store contribute to creating stable lives forthe people of coffee-producing regions.

LAWSON hospital (in-hospital) convenience store
LAWSON hospital stores led all the competition in initiating operations
inside hospitals, and remain the market leader in hospital-based
convenience stores by number today. We draw on our experienceand expertise to customize each store to meet the specific needsof the hospital in question. Our services include selling doctorrecommended products and providing mobile catering services
in hospitals in addition to offering Lawson’s regular products andservices. Our aim is to cooperate with hospitals
in satisfying patients’ needs in accordance with
our Corporate plilosophy, “Creating Happinessand Harmony in Our Communities” (in this case,customers under long-term hospital care).

 atios of convenience store chainsR
operating in-store hospitals
Other
chains53%

Display shelves stockedwith key hygiene products*Not applicable to single-origin ordecaffeinated series.

A focus on stabilizing worker’s
lives as well

The warm omotenashi (“hospitality”) of skilled
store crews
LAWSON is working to improve its store crews’ job satisfaction by
shortening shifts and implementing work skill training. Our original
Fantasista qualification program is designed to instill special skills infour categories: MACHI café, fast food (FF), Machikado Chubo instore kitchen and customer service. Crews distinguished by special
aprons or badges provide leadership with superior performancebased on their special expertise in store operation.
Certification

Name tag

BadgesLawson47%*Data based on survey results compiled
by Lawson (as of August 2019)

MACHI café

Fast food

Examples ofcategory badges
Certification logos
vary with the category

Machikado Chubo Customer
in-store kitchen
service25
LAWSON INTEGRATED REPORT 2019

A MACHI café
Fantasista
apron

GAP certification of LAWSON Farms*1

As part of efforts to assure stable, long-term supplies ofsafe, reliable domestic agricultural products, the Lawson
Group operates LAWSON Farms in cooperation with local
farmers in 21 locations throughout Japan (as of May 2019). We are working
to standardize our farm management system by pursuing acquisition ofJapan Good Agricultural Practices (JGAP) certification awarded to farms
operated with concern for food safety and environmental preservation. Asof fiscal 2019, a total of 21 LAWSON Farms had acquired the certification,with seven of them certified to the ASIA GAP international standard as well.
LAWSON Farms employ the Nakashima method*2 of cultivating
ideal soil to produce most of their healthful vegetables,
salads, deli items, and fresh-cut vegetable products. Thisadvanced agricultural methodology facilitates LAWSON
stores’ ability to offer reliably safe
agricultural products, while also
providing job opportunities andsupporting sustainable development
in regional communities.
*1	The registration number inscribed below the JGAP certified farm mark is
the number for LAWSON Farm Chiba.
*2	A soil analysis is conducted prior to planting to prepare healthy soil withwell-balanced mineral content, and each crop is supplied with appropriate
nutrition depending on its growth rate. Farming with this Nakashimamethod produces vegetables that are delicious, nutritious and safe.

Crew members who have qualified as“registered sales clerks” provide customer
consultations concerning medicines
Every store that carries OTC drug employs crew members with national
registered sales clerk licenses. Customers who visit convenience
stores to shop for medicines often want immediate relief from cold or
headache symptoms. Registered sales clerks check the customer’s
physical condition and symptoms first, andthen recommend the most appropriate
products. LAWSON has the added advantage
of enabling customers to purchase nonmedicinal health products in addition to
medicines.
Consultation services concerning OTC
drug and various other products

CHALLENGE

3

Regional society

In the role ofmanagement owner (MO)Business management

To help franchise stores conduct business with a smile
Multiple stores

Multiple storesSingle store
Average numberof crew

Approx. 15

1 store manager
Average numberof crew at 2 stores

Approx. 30

SC

3 store managers
Average numberof crew at 4 storesSC(store consultant)(store consultant)
Making rounds and providing Making rounds and providing
guidance to individual stores guidance to individual stores
Average No. of stores managed: 10
Average No. of SCs: 2

Approx. 60

Franchise
storesReinforcing support for franchise stores

Lawson Headquarters’ closest, most strategic partners are thefranchise owners and store crews who serve customers on theforefront in communities throughout Japan.
If they are to serve as hot stations in our communities
where people gather with a smile, LAWSON franchise storesmust be active and energetic. Headquarters contributes by
supporting their recruitment activities and optimizing theirbenefit packages, as well as by reinforcing various initiatives andsystems to encourage sound store management through clear,
open communication.
Lawson recommends, moreover, that its franchise owners
operate more than one store. This enables them to spread therisk posed by the emergence of new competing stores, so thatthey can maintain stable management while expanding theirbusiness more easily than when operating a single store.
Lawson has established the original Management Owner(MO) system to support franchise owners who open additional
stores based on a reinforced partnership with Headquarters. The
MO system is making a substantial contribution to the progressof the LAWSON chain as a whole, not only by enhancing thebrand image of the Lawson chain through development ofSocialcontribution
activities

Abundant
product
lineupNew
services
development

LawsonHeadquarters

Joint business operations

Environmental
activities

model stores and sales floors, but also by providing a platform
for MOs to advise other owners on store management as wellas to exchange opinions or propose improved work procedures
to Headquarters management personnel as representatives ofthe franchise stores in their region. As of February 2019, there
were approximately 190 MOs operating stores in various regionsof Japan.
Our aim for the future is to make people feel happy to have
LAWSON in their community, while providing further support for
our franchise stores.
Multiple store ownership ratio *As of May 2019
(%)
50
40

40.5

40.8

42.3

44.7

45.1

30
20
10
0

In the role ofmanagement owner (MO)Multiple stores
Multiple storesSingle store
Average numberof crew

1 store manager
Average numberof crew at 2 stores

Approx. 30

3 store managers
Average numberof crew at 4 stores

Approx. 60

Business management
SCSC(store consultant)(store consultant)
Making rounds and providing Making rounds and providing
guidance to individual stores guidance to individual stores
Average No. of stores managed: 10
Average No. of SCs: 22015 Regional society
2016
2017
SocialAbundant
contribution
product
Multiple
activities
lineup store ratio *As of May 2019

Franchise
24.4%
storesSingle store

New
services
development

Approx. 15

26
LAWSON INTEGRATED REPORT 20192018

Joint business operations

2019(Fiscal year)

LawsonHeadquarters

Multiple stores

Environmental
activities

75.6%

Communication to build strong
partnerships with franchise stores
Lawson has established a number of systems aimed atstrengthening its partnerships with franchise stores by enabling
members of the Board of Directors, including the President, tocommunicate directly with franchise stores. We place special
value on feedback from our franchise stores, which operate
in direct contact with customers, and seek to achieve mutual
consideration and mutual prosperity with them through close
communication.

Lawson Seminars

Lawson Seminars are convened
for every franchise store
each spring and fall in sevenvenues throughout Japan. The
President and other membersof management share theCompany’s policies anddirections with the franchiseowners by providing them with
Seminars for franchise stores are held
nationwide.
detailed explanations of futurebusiness strategies, and informing them of product development
planning in conformance with the policies.

Area meetings

Area meetings are regional
workshops conducted monthly at
Lawson branches from Hokkaido
to Okinawa. Franchise stores fromthe same areas gather to sharedetails of sales activities planned
for the following month as wellAn area meeting
as of their past successes, or toexchange opinions with the aim of helping individual stores improvetheir management capabilities.

Direct line to the President

This original Lawson system enables franchiseowners, store managers and store crew members
to express their opinions, proposals or requests
for improvement directly to the President. The
President checks and replies to all the messages
delivered over this line.

Lawson Owner Welfare Association board meetings

Meetings of Headquarters executive officers and representatives selected fromamong franchise (FC) owners in each area convene twice a year. Organized toprovide FC owners with opportunities to exchange opinions with Headquarters,
the meetings are attended by the
President and other members of
Lawson’s directors, who join in
discussions covering a range of issues.
A mentoring program was introduced
Lawson Owner Welfare Associationin August 2019 to allow FC owners to A
board meeting at Headquarters
learn from the experienced FC owners.

Lawson Owner Welfare Association Women’s Club opinion
exchange meetings

The Lawson Owner Welfare Association Women’s Club was established byfemale FC owners in 2015.
Its members meet twice a year to directly exchange opinions and ideas withmanagement concerning issues such as store development and work styles.

Lawson Franchise Store Advisory Committee

Established in April 2019, the Lawson Franchise Store Advisory Committee
is a new initiative for promoting improvement and innovation in Lawson’sinteractions with FC owners by enabling them to express opinions concerning
Headquarters’ management and strategies from the FC perspective.

Franchise store benefit system
Lawson Owner Welfare Association
The Lawson Owner Welfare Association provides franchise stores with
benefits embodying the three principles of “comfort,” “health” and“peace of mind.” The wide range of benefit packages includes various
allowances, mutual aid and compensation for franchise owner members
and their families as well as for store crew and staff members.
	Allowances for use of sports facilities
	Allowances for full medical examinations and health checkups
	Allowance for influenza vaccines	Nursery and day-care center allowances for store crew members	Hosting of health promotion / family events and seminars for women	Travel and accommodation services	Allowance for correspondence courses
	Congratulatory and condolence payment system
	Voluntary group insurance system for franchise stores (selection ofvarious insurance packages)
	Discounts and preferential treatment at gourmet, leisure, entertainment,child-rearing, nursing care and other life enrichment and support facilities
	Car rental discounts

MO General Meetings

MOs and Headquarters management join each other at the annual MO
General Meetings for free exchanges of opinions. These meetings give
regional franchise store representatives an opportunity to participate in
Lawson’s general management.

MO Executive Board Meetings

These biannual meetings provide venues for an executive committeeof representatives selected by regional MOs to exchange opinions with
Headquarters management. The MOs elected to the Board operate 10 ormore stores on average.

Left: Participants in a health promotion seminar
Right: A Lawson Owner Welfare Association pamphlet

Franchise store questionnaires

LAWSON STAFF personnel placement business

Questionnaire surveys concerning store management-related issues such as
satisfaction levels, business challenges, health conditions, and opinions on
Lawson headquarters are conducted annually among franchise owners.
In response to the questionnaire results, we make effort to develop abetter relationship with franchise stores.

Lawson Owner Hotline

In July 2019, Lawson established a system of both internal and external
telephone consultation contacts to enhance communication with franchiseowners. The external contact, comprising a hotline installed in a law firm,
permits franchise owners to discuss issues they find difficult to raise in direct
consultations with in-house personnel.

27
LAWSON INTEGRATED REPORT 2019

Lawson joined Fusion’z Co., Ltd., one of its
MOs, in establishing the Lawson Staff, Inc.
service in March 2014 with the aim of creatinga working environment in which store crew
members of different ages, genders andnationalities can work happily with peaceof mind for extended periods. Experienced
professional trainers conduct training programs
to prepare recruits to work at LAWSON franchise
stores in 17 domestic and 5 overseas locations.
LAWSON STAFF confirms that the conditions are acceptable to bothparties before dispatching human resources to the franchise stores.

CHALLENGE

4

To employ digital innovations to address the labor shortage issue
Achieving dramatically improved efficiency
in daily operations through measures toincrease productivity

2017

2018

Optimizing the operation of Machikado Chubo in-store kitchens
In 2017, we reorganized theoperations of our Machikado Chubo
in-store kitchens, which prepare freshcooked boxed meals and bakery
items at LAWSON stores, to optimize
the operational efficiency of their work
procedures. We are developing alineup that can be prepared easily by
unifying the product packaging andproduct quantities. This has led to a

Today’s rapidly declining birthrate and aging population, labor
shortage and rising personnel costs are presenting major
challenges for the convenience store industry. Lawson is actively
supporting franchise stores by implementing measures toachieve labor savings in daily operations and create comfortable
work environments for seniors and foreign staff. These include
reducing both the workload on store crew conducting timeconsuming checkout work and customer wait times at thecheckout counter by introducing automated checkout systems
such as POS cash registers with automatic change dispensers
and smartphone cash registers. Other innovations enableproduct ordering and on-site cooking to be performed more
efficiently with less effort.

reduction of about 1.5 working
hours/day per crew member. We

are also moving quickly to facilitate
the work of food preparation further
by introducing automatic dishwashers
into stores with Machikado Chubo instore kitchens installed.

2015

2017

Semi-automatic ordering & planned ordering systems

Introduction of digital tablets

Lawson introduced an AI-based semi-automatic ordering system
in 2015. The system analyzes data on such various factors as theweather and sales situations at other stores to predict consumer
demand for boxed meals, sandwiches and other items andrecommend appropriate product offering and order quantities basedon the observed purchasing behavior of its over 91.29 million Ponta
Card members (as ofend June 2019). Thissystem, combined with
our planned orderingsystem for beverages
and processed foods,

Tablets introduced into all the LAWSON stores in 2017
have facilitated smooth work procedures by displaying
work schedules in terms of “when, what and how,” andby accompanying some tasks with photos to assist lessexperienced crew members. The devices have improved

saves about 2.0
working hours/day
per crew member.

Introduction of LAWSON smartphone cash register
LAWSON smartphone cash register, a mobile payment system using
customers’ smartphones, was introduced at a number of storesin 2018. Customers pay for purchases simply by downloading theapp and scanning barcodes printed on product packages with theirsmartphones. The process is completed in approximately a quarterof the time required for payment by the conventional method.
Combined use of manned cash
registers and the LAWSON
smartphone cash register system
during peak shopping periods inthe morning and at lunchtime cansignificantly reduce waiting time at
the checkout counter. The system
is in operation in 116 storesin Japan (as of August 2019),
with sequential expansion of its
deployment under way.

2018

productivity
further byrecommending
OTC fastfood productselections andquantities basedon sales data for
individual stores.

28
LAWSON INTEGRATED REPORT 2019

Introduction of POS cash registers with automatic change
dispensers
POS cash registers with automaticchange dispensers have been installed
in all LAWSON stores since 2018.
Easy for both foreigners and seniors
to use, the registers are reducing theburden on crew members at checkout
counters by eliminating the need tocount cash received and paid out
manually. The working hours requiredfor checkout and cash register
inspection have been reduced by 1.5
hours/crew member. Since cash
cannot be paid into or removed fromthe registers, moreover, losses due torobbery are also decreasing.

A selfservice
fixtureDigitalsignage

Advanced labor-saving measures deploying
digital technologies
Lawson is advancing its labor savings further by upgrading its
store fixtures and cooking facilities as well as by introducing digitaltechnologies to enable smoother everyday store operation andto free store crew members to concentrate on the warmhearted
services that only human beings can provide.
We had installed new computers in all the stores by the endof June 2019. We are currently using Owner Portal to provide
powerful support for multiple-store owners by enabling them tocheck all their stores’ management information from any locationand Multiple-store Remote Login to facilitate remote orderacceptance and placement. A self-checkout system compatible
with such electronic payment methods as credit card andelectronic money payments and the use of points, currently in thetesting phase, is scheduled for introduction into all the stores by
this autumn. We are also developing stores equipped for use with
LAWSON smartphone cash register one after another. New stores
to open in the future will adopt a new self-service fixture thatenables customers to take out OTC fast foods by themselves.
This service is expected to realize a reduction in daily working
hours of approximately one hour/crew member.
Other projects leveraging digital technologies include
experimental fully automated store operation during 5 late night
hours. Customers gain access to the stores by unlocking themwith a downloaded smartphone app and make payments at fully
customer-operated cash registers or using LAWSON smartphone
cash register. We are also actively leveraging results obtained
through a number of development projects still in the testing
phase. These include a door-unlocking system using biometricidentification (including facial recognition), customer service
robots to support store crew, an automated shelf-stocking
system, electronic product management using radio frequency
identification (RFID) tags, a fresh-cooked Kara-age Kun robot
automated on-site cookers and next-generation fryers.

Yet anotheradvancedsystem currently
in the works
will provide a
new purchasing
experienceby makingstore shelvescompatible with
IoT and using
digital signage
to recommend
products
selected forthe individual
customer. We
are expanding
our use of
initiatives of this kind, moreover, to verify
the efficacy of using brick-and-mortar
stores as media to generate new profits.

A customeroperated cash
register

A fully
automated
store

Anelectronic
RFID tag

Products with electronic tags attached
RFID (radio frequency identification) is a wireless technology that
identifies products by reading information recorded on electronictags. The price and other product information are inscribed on thetags in the form of data to be read by electromagnetic wave radiation.
This system is expected to reduce store crews’ workload significantly,
not only by simplifying checkout procedures but also by lightening
their inspection and stocktaking duties.
In an initiative led by the Ministry of Economy, Trade and Industry(METI), Lawson and other major convenience store chains haveformulated the Declaration of a Plan to Introduce 100 Billion
Electronic Tags for Products in Convenience Stores, which commits
the stores to attaching electronic RFID tags to all the products on their
shelves (an estimated 100 billion electronic tags/year) by 2025.

29
LAWSON INTEGRATED REPORT 2019We value warm people-to-people interactions
above all else.
That’s why we deploy advanced technologies.
The increasing severity of the labor shortage has made deployment
of digital technologies to improve work efficiency and productivity
critical issues for convenience store chains. Lawson has responded
by introducing such technologies as semi-automatic orderingsystems and POS cash registers with automatic change dispensers.
We established the LAWSON Open Innovation Center in May 2017
to help us keep pace with the accelerating pace of change.
The Center is equipped with a laboratory that simulates anactual store as a venue for conducting experiments in collaboration
with various companies and government agencies in Japan andoverseas. Repeating a cyclical process of pre-introduction analysis,laboratory verification and in-store trials enables us to introduce
new technologies into our stores quickly and smoothly. In October
2018 we exhibited some of our technologies at CEATEC JAPAN,
one of Asia’s largest IT technology and electronics shows, where we
displayed a walkthrough payment system using electronic tags anda real-time inventory management system.
Our aim is to install systems that “put people first.”
Convenience stores have evolved beyond shopping venues into
facilities offering a variety of services. Their role in people’s lives canbe expected to become even more significant going forward. Our
proactive introduction of advanced technologies into our storesis equipping us to determine
our customers’ needs moreaccurately, and freeing up time
to welcome them even morecordially. The labor savings andwork efficiency realized throughadvanced technologies promise
to make tomorrow’s convenience
stores even more enjoyable andexciting places that offer warmer
human interactions than ever. Thisis the convenience store of theKunitsugu Makino
future we envision.

General Manager, Open Innovation Center

CHALLENGE

5

To realize a Lawson where anyone can work for an extended period cheerfully, energetically and joyfully
Acquisition of
special Platinum
Kurumin certification
for companies withexcellent childcare
support programs

Eruboshi (Level 2)accreditation as acompany with large
numbers of female
employees active on
the front lines

Childcare leavepromotion posters
displayed in every
officeRecipient of thegold gan-allybu (“cancer ally
declaration“)award atio of male employees taking paternity
R
leave(Persons)

No. of paternity leaves (left axis)
Ratio of paternity leaves (right axis)

150

91
80

80

70
100

(Persons)
250

80

200

40
16

0

(%)
100

60

50

20

0

23

93

94

109

2013

2014

2015

2016

2017

111

 roportion of working mothers among femaleP
employees

0
2018(Fiscal year)

No. of working mothers (left axis)
Proportion of working mothers
among female employees (right axis)

150

21.2
16.0

100
50
0

21.9

24.5

24.2

16.7 17.8(%)(Persons)

40

140

35

120

30

100

25
20
15

8.4

10

4.6
10

23

67

91

107

128

151

182

202

 roportion of female employees inPmanagement positions

5

0
2001 2005 2010 2013 2014 2015 2016 2017 2018
(Fiscal year)

No. of female employees in management positions (left axis)
Ratio of female employees in management positions(%)
to all employees (right axis)
10
9.5
7.9
6.6

80

4.9

60

0

5.6

8
6

3.8

4

2.8

40
20

8.3

7.0

2

0.9
8 26

37

52

63

76

75

92 108 120

02001 2005 2010 2012 2013 2014 2015 2016 2017 2018
(Fiscal year)

30
LAWSON INTEGRATED REPORT 2019

Promotion of diversity and realization of awork/life balance	Creating work environments in which diversified
personnel work enthusiastically
Lawson promotes diversity with the aim of assembling employees withwidely varied values who join together and perform to their full potential
to strengthen its franchise chain further. We have constructed systems
for promoting diversity under the direction of the President, establisheda special subsidiary to promote employment of people with disabilities,
developed childcare facilities in our workplaces, and opened offices for
conducting labor-management consultations with a focus on improving
operating efficiency and work environments.
We continue to pursue active efforts to recruit women and foreign
nationals as regular employees, while broadening the scope of ourinternational employment activities to include such initiatives as local
hiring in South Korea and elsewhere.
In our desire to retain our female employees over the long term, we
have introduced such programs as career development training, childcare
leave training, and elective leadership training to support young women in
their career and life planning. We are continuing to pursue these initiatives
with the aim of increasing the proportion of female employees among
those in management positions to 30% by fiscal 2020.
We encourage male employees to take paternity leaves in thehope that active participation by men in child-rearing and housework will
result in work-style reforms leading to efficient, highly productive work
styles regardless of gender. The ratio of new fathers taking paternity leaveexceeded 90% in fiscal 2018, demonstrating that taking paternity leaves
is becoming an established practice in our corporate culture.
In 2018, we reinforced our efforts to become a company whose
employees can continue to experience job satisfaction over extended
periods of employment by introducing a flexible full-time employee
system (workplace limitation system) to help them balance their work
lives with such private concerns as child-rearing, nursing care or cancer
treatment.

motivation and improving the business performance of the LAWSON
store chain as a whole.

Diversity Promotion System
President
Marketing Strategy Department

Director, Human Resources Division
Human Resources Division
Diversity Promotion Officer

Marketing Team

Diversity TeamGenki Leader Committee

Operating under the President’s direction, the Human Resources Division takes responsibility for systemdesign, operations and appointments, while the Marketing Division seeks to create new value from ideas
generated by female employees.

The President joins participants in a training
session for selected female employees

A Seminar on Women and Healthorganized in support of both active work
styles and mental and physical health

Implementing a nurturing personnel
management system
	Cultivating human resources who think and act on theirown initiative
Guided by our Corporate Philosophy, we encourage every employee
to think and act independently by employing two evaluation systems:
the Employee Behavior and Skill Level Evaluation, which evaluates theemployee behavior (processes) that produces positive results; and the
Performance Evaluation, which assesses results concerning actual
employee behavior.
We also encourage every employee to declare a career plan basedon a career development sheet, and follow up by conducting careerdevelopment interviews to support their growth as individuals.
In fiscal 2018, we discontinued the internal award system we
had implemented to honor employees who addressed challenges
voluntarily and achieved results in terms of operational or businessperformance improvement. We replaced it with the new L-Challenge(Lawson Challenge) Award initiative that inspires employees to suggest
or implement ideas unique to Lawson. We are developing a structure
for encouraging employees to take up challenges to improve work
procedures and conditions from a Companywide perspective, beyond
the scope of their own responsibilities, thus sharing their knowledge withothers throughout the Company as a means of enhancing employee

Industrial safety and hygiene promotion	Efforts to assure safe, worker-friendly workplaces
We ensure that the 5S Methodology encompassing “sorting,systematizing, sanitizing, sustaining and supervising” is fully implemented
by our franchise stores in accordance with procedures clearly specified
in our operation manuals. We also hold safety management meetings
Companywide to raise awareness concerning driving safety among store
supervisors and others whose jobs involve driving. When a serious workrelated accident occurs, we investigate and analyze the cause and share
our findings internally with the aim of preventing recurrence.

Health initiatives for employees andfranchise owners
	Conducting health management that begins with
employees’ concern for their own health
A company that supports customers’ efforts to lead healthy lives, Lawson
also prioritizes the health of its employees, franchise owners and store
crew members. Led by the President in his role as Chief Health Officer(CHO) and the Chairperson of the Health Station Promotion Committee,
we reinforce and promote health management and pursue health-related
initiatives for our employees and customers. We established the Lawson
Group Health and Wellness Promotion Center In September 2018 tostrengthen various measures to these ends in cooperation with our labor
union and the Lawson Health Insurance Association.
Promoting the health of its franchise owners is another importantconcern for Lawson. The various health preservation programs provided
through the Lawson Owner Welfare Association (see page 27) include a
subsidy plan for medical examinations and operation of a health support desk.

We contribute to enhancing health promotion
throughout the Lawson Group by improving
employees’ health promotion and health literacy.
Established in September 2018, the Lawson Group Health and Wellness
Promotion Center is an organization reporting directly to the President on
issues concerning further enhancement of Lawson Group employee health.
The Center maintains a particularly strong focus on developing aframework for continuing health maintenance through “health collaboration”
with the Lawson Health Insurance Association. As part of these efforts, wesought to reduce the risks posed by lifestyle-related diseases in fiscal 2018
by recommending reexamination of employees whose medical exam results
were below standard as well as by strengthening support for programs
providing specific health guidance.
The Health Challenge!, a six-month program initiated in 2016 for the
purpose of stimulating health awareness among employees (who use adownloaded app to monitor the number of steps they take each day andthe content of their meals), is expanding annually in terms of both availability
and the number of (voluntary) participants. The program gives employees
an opportunity to pay greater attention to their health, both as individuals
and members of an organization, and generates positive workplacecommunication.
We seek to contribute to promoting health promotion throughout
the Lawson Group, not only to accommodate our legal responsibilities as acompany, but also to enhance the physical and mental
health of everyone concerned with Lawson.
This begins with efforts to improve employee
health promotion and health literacy, and thendisseminating information on successful approaches
to high-risk populations among the Group
companies and franchise stores.

Health management systems
CHO (President)
Assistant CHO(Chairman, Lawson Health
Insurance Association)(Supervising industrial physician)Health Station
Promotion
Committee

Human
Resources
Division

Lawson Group
Lawson Health
Health andInsurance
Wellness
Promotion Center Association

31
LAWSON INTEGRATED REPORT 2019

Conducting interviews with industrial
physicians and public health nurses tosupport employee health

Miho Yomoda

Deputy General Manager
Lawson Group Health and Wellness
Promotion Center

Environmental(Machi)friendlinessCurrent CHALLENGE

Lawson takes up challenges originating at the stores as part of efforts to achieve its
Key Performance Indicator (KPI) targets in accordance with its 2030 SDG objectives.
CHALLENGE

CHALLENGE

To reduce plastic use

1

To reduce food waste
Goal for2030 (KPI)

2

Goal for2030 (KPI)

Reduction of food waste by 50%
from 2018 level

Recycling of unsold foodLawson sends unsold food to recycling plants to be turned into pig and chicken feed andfertilizer. We also recycle the oil used to deep-fry foods in the stores as feed additives(livestock feed ingredients), biodiesel fuel and additive-free soaps. These and otherinitiatives led to a food recycling rate of 47.9% in FY2018, exceeding the statutory target of
44.5%.

Plastic containers and packaging
Reduction of 30% from 2017

(Adoption of original product packaging using 50%
eco-friendly materials)

Switch to paper cups for MACHI café iced coffee
In 2019 we began replacing the plastic cups used for MACHI
café’s iced coffee with paper cups like those used for hot drink
cups. Although still made of plastic, the lids have
openings for drinking that eliminate the need forstraws. This will reduce the amount of plastic
used per cup by approximately 80%, which will
add up to a reduction of approximately 540 ton
when the cups are adopted by all the stores.

Food waste reduction program
Lawson tested the food waste reduction program in Okinawa and Ehime Prefectures from
June to the end of August 2019 as part of efforts to minimize the volume of edible fooddiscarded by its stores. Customers participating in the program earn five points for every
100 yen they spend after 4:00 p.m. on boxed meals and rice balls, which have extremely
short shelf lives, and 5% of total sales of these items is donated to children’s support
groups.

Redesign of original cold drink containers
The original containers used for cold drinks suchas NATURAL LAWSON’s Green Smoothies andyogurt drinks were redesigned in 2019. The
outer lids were removed from all the containers,a change we expect to reduce our plastic use bysome 320 tons per year.

Use of vegetables with imperfections for side-dish productsSome 10 to 15% of the vegetables grown
Products using vegetables with imperfections*on LAWSON Farms throughout Japan fail tomeet retail store standards for shape or size,
despite their equivalence in terms of flavor andnutritional value to unblemished products. We
use these vegetables with imperfections in theside dishes, salads, and pickles sold in ourstores as part of efforts to achieve sustainable
Crisp corn salad
Mixed seaweed salad
agriculture by supporting the producers and* Products listed as examples here may have been discontinued.
reducing crop waste.

 witch to chilled noodle containers made of recycled
S
PET material
The material used for such chilled noodle dishes as chilledramen noodles with various toppings has been changed from
PET material to a material containing
recycled PET obtained from recycled
PET bottles.
Dog snacks made withshredded tender chicken,
carrots and gizzards

32
LAWSON INTEGRATED REPORT 2019

CHALLENGE

3

To reduce plastic shopping bag use
Goal for2030 (KPI)

100% reduction in use of plastic shoppingbags

 artial use of plant-based resin in plastic
P
shopping bags
The material used to make NATURALLAWSON’s plastic shopping bags is derived inpart from polyethylene made from sugarcane.
Raising awareness of reduced plastic shopping bag use
Our efforts to reduce our stores’ use of plastic
shopping bags include asking customers
whether they need a bag at checkout, in-store
announcements and posters. The weight ofplastic shopping bags used per store in FY2018
was down by 27.2% from 2000.
 romoting widespread use of easily portable eco bags
P
Intent on reducing the use of plastic
shopping bags, we created a
Convenience Store Eco Bag of theperfect size for carrying such frequently
purchased items as boxed meals andbottled drinks. We introduced free
distribution of the bags at a numberof LAWSON stores in March 2007
to encourage as many customers as possible to carry theirown shopping bags. We followed this by conducting sales ofthe bags via our Loppi in-store multimedia terminals and by
releasing the bag specifications to encourage other companies
to join our effort. A total of 4.44 million* bags had been
distributed as of end February 2019.

CHALLENGE

4

To reduce CO2 emissions
Goal for2030 (KPI)

Reduction in CO2 emissions per store by 30% from 2013

Efforts to achieve energy-saving targets
We have implemented various energy-saving initiatives, including
the introduction of CO2 refrigeration systems, solar photovoltaics
and LED lighting. We are
pursuing such further efforts
as revising our building
specifications to accelerate
CO2 emissions reductions in
the building life cycle.
Approximately 3,400 stores haveintroduced CO2 refrigeration systems (asof end February 2019).

Implementing the Ten Energy-saving
Rules at the stores
Lawson has formulated a set of “TenEnergy-saving Rules” to reduce its stores’
electricity consumption by improving
the efficiency of their refrigeration andair-conditioning systems. The rules, which every store isencouraged to observe, include recommendations on suchfactors as air conditioner temperatures and filter cleaning
frequency and beverage storage temperatures.

Supply chain CO2 emissions in fiscal 2018
Total CO2 emissions Approx.

 evelopment of energy-saving model storesD
Lawson has built energy-saving model stores equipped withleading-edge technologies in regions throughout Japan foruse in experimentation with and verification of the stores’
energy-saving and energy efficiency results in preparation for
introducing equipment and systems that prove highly effective
into new stores. One of these stores, the Tatebayashi Kidocho
LAWSON store opened in January 2018 is the first convenience
store to include cross-laminated timber (CLT) sourced fromJapanese cedar© Atsushi ISHIDA
trees among theleading-edge
technologies
employed in its
structure andinterior.
The Tatebayashi Kidocho LAWSON store* The number includes eco bags other than the Convenience Store Eco Bag.

33
LAWSON INTEGRATED REPORT 2019

5,565.0 thousand tons

Method of calculating greenhouse gas emissions in the supply chain
Calculated based on the Basic Guidelines on Accounting for Greenhouse Gas Emissions throughout the Supply
Chain, Ver.1.0, explanations by industry (retail industry).
Gasoline consumption by Company vehicles (Scope 1*2) 0.08%[4.4]Electricity consumption by Headquarters, regional offices, branch offices andCompany-operated stores (Scope 2) 0.48%[26.8]

Business trips (Scope 3) 0.01%[0.6]Waste materials generated by stores and industrial waste generated at times ofstore closures and remodeling (Scope 3) 0.43%[24.0]
Disposal of containers, disposable chopsticks and plastic shopping bags
(Scope 3) 0.78%[43.2]
Electricity consumption associated with procurement of electric power (Scope 3)

1.43%[79.7]

Energy consumption by delivery centers (Scope 3) 1.79%[99.4]
Electricity consumption
by franchisee stores
Stocked raw(Scope 3)materials
20.08%(Private and[1,117.4]
national brandproducts, plastic
shopping bags, etc.) (Scope 3)74.92%[4,169.5] *1

CO2 emissions calculation rule
Scope of calculation:
Use of Company vehicles, LAWSON, NATURAL LAWSON and
LAWSON STORE100 (13,566 stores), purchased goods andservices for store sales
Target period:
April 1, 2018 to March 31, 2019 (administrative year)*1 Figures in brackets [ ] indicate CO2 emissions (thousand tons)*2 Scopes 1-3: Greenhouse gas emissions in the supply chain
are classified by source.

Corporate Governance
Executives

Management team underpinning sustainable growth
The management team led by the President
represents human capital appointed for its varied
experience and expertise to ensure the diversity
required to facilitate appropriate decision-making
and supervision. Several independent officers
who have no potential conflicts of interest withthe general shareholders are also appointed toensure management transparency and fairness.
To add further assurance, there are three
independent directors, a number comprisingover one-third of the total of eight directors;
and five of the twelve officers, including thecorporate auditors, are women.
Under the Executive Officer System,
meanwhile, the roles of the members responsible
for execution of business and those responsible
for corporate management are separated andclarified. Lawson limits the size of the Board toenable speedy business decision-making.

Reinstatement

Reinstatement

Reinstatement

Katsuyuki Imada

Satoshi Nakaniwa

Years on Board: 2 Company’s shares held: 1,800

Years on Board: 2 Company’s shares held: 100

In addition to experience in the employ of Mitsubishi Corporation,
Katsuyuki Imada has extensive experience acquired as Lawson’s
CFO; Director, Corporate Strategy Division; and General Manager,
Next-Generation CVS Promotion Division.

Satoshi Nakaniwa has extensive knowledge of finance andaccounting as well as of business investment and evaluationacquired in the employ of Mitsubishi Corporation.

Member of the Board, Senior Executive Vice President, Director of Corporate Strategy

Member of the Board, Executive Managing Officer, Chief Financial Officer

Reinstatement

Reinstatement

OutsideOutsideIndependent

Reinstatement

Independent

Sadanobu Takemasu

Emi Osono

Yutaka Kyoya

Keiko Hayashi

Years on Board: 5 Company’s shares held: 3,200

Years on Board: 7 Company’s shares held: 800

Years on Board: 6 Company’s shares held: 0Years on Board: 3 Company’s shares held: 900

2014, Senior Executive Vice President, Representative Director;
2016, appointed President and CEO, Representative Director. Joined
Lawson from Mitsubishi Corporation.

Emi Osono is an academic with in-depth knowledge of global
corporate management, corporate strategies and organizational
behavior.

Yutaka Kyoya has a broad understanding of the living essentials
field, primarily as it relates to foods, acquired in the employ of
Mitsubishi Corporation

Founder of DoCLASSE, Keiko Hayashi has experience andexpertise in corporate management and an in-depth knowledgeof marketing.

President and CEO, Representative Director, Chairman of the Board

Member of the Board (outside)

Member of the Board

34
LAWSON INTEGRATED REPORT 2019

Member of the Board (outside)Reinforced independence through anincreased ratio of outside officers
Increasing the ratio of outside officers with diverse
backgrounds who bring a high level of expertise to theiroffice has produced a system capable of verifying theappropriateness of business execution and supervising
the observance of laws from an independent, objective
viewpoint.
Outside(independent)
officers

Reinstatement

Reinstatement

OutsideOutsideIndependent

Independent

Kazunori Nishio

Miki Iwamura

Toshio Takahashi

Years on Board: 3 Company’s shares held: 0Years on Board: 1 Company’s shares held: 0Years as auditor: 3 Company’s shares held: 0

Kazunori Nishio has extensive knowledge of the living essentials
field with specialization in the retail industry acquired throughexperience in the employ of Mitsubishi Corporation.

Miki Iwamura has extensive knowledge acquired throughher work at GOOGLE LIMITED LIABILITY CO. in Japan, which
encompasses management utilizing digital Big Data, marketingand brand enhancement.

Toshio Takahashi has years of experience as an employee ofa major bank and as a standing corporate auditor for a major
IT company as well as extensive knowledge in the fields ofcorporate finance and accounting.

Member of the Board

Member of the Board (outside)6

12Standing Corporate Auditor (Outside)

Ratio of outside officers

Active appointment of female officers
Stressing diversity in its management, the Company
is proactive in its appointment of female officers. We
also pursue continuous efforts to promote careeradvancement of women other than officers to place
more women in management positions.
Femaleofficers
Reinstatement

Newly
appointed

OutsideOutsideIndependent

Independent

Masakatsu Gonai

Eiko Tsujiyama

Yuko Gomi

Years as auditor: 2 Company’s shares held: 6,600

Years as auditor: 8 Company’s shares held: 900

Years as auditor: 0 Company’s shares held: 0

In addition to his deep understanding of Lawson’s operations basedon experience acquired as branch manager and in CR executive
officer and human resources management, Masakatsu Gonai has
expertise in risk management and human resources development.

Eiko Tsujiyama is an academic with in-depth knowledge of corporate
finance and accounting and experience working for the BusinessAccounting Council of the Japanese Financial Services Agency as well
as for the National Tax Council of the Japanese National Tax Agency.

Yuko Gomi is an attorney with extensive business experience and broad
insight based on her years of practice in corporate legal affairs and risk
management and as a Legal Advisor to the Minister’s Secretariat of the
Cabinet Office and an Information Security Advisor to the Japan Coast Guard.

Standing Corporate Auditor

Corporate Auditor (outside)

5

Corporate Auditor (outside)

35
LAWSON INTEGRATED REPORT 2019

Ratio of female officers

12Corporate GovernanceDirectors’ Perspectives

Kazunori Nishio
Director

Emi Osono

Miki Iwamura

Outside Director

Outside Director

I will leverage Mitsubishi Corporation’s strengths to provide full
support for Lawson’s sustainable growth.
Kazunori Nishio
Director

Keep an eye on Lawson as we seek genuine
happiness for people in our communities.
Lawson has taken a new step forward in its reassessment of the ways in whichconvenience stores can create happiness in the community by formulating a new slogan,“Hot Station (Best Relief Hub) in Our Communities.” We interviewed three directors
concerning Lawson’s Three Promises, use of digital tools, directions for future growth andpriority issues for resolution.

Senior Vice President, Division COO, Retail Division,
Consumer Industry Group, Mitsubishi Corporation

I believe that Lawson, which currently
operates approximately 14,500 storesthroughout Japan, has enormous growthpotential operating in cooperation with
Mitsubishi Corporation.
As the population continues tocontract, competition is increasing
in severity, both within and between
industries. This trend underscores theimportance of continuing to provide
products and services that meet
consumers’ needs. Lawson’s new
products are better than ever, with several
scoring big hits this term. In our service
field, meanwhile, the establishment of
Lawson Bank has provided a basis foroffering various financial services. Our
new LAWSON FRESH PICK and SMARI*
services, which use our existing delivery
networks to provide new Lawson value,
are continuing to improve. The adoptionof laborsaving digital technologies has
proven effective in dealing with the labor
shortage, and new initiatives in this area
are in the works.
Our main objective
is to work with ourfranchise owners toachieve sustainablegrowth throughout
the convenience store
business. Providing
our franchise owners
and store crews with36
LAWSON INTEGRATED REPORT 2019

more fulfilling, more stable lives is helping
to improve Lawson’s reputation as well.
Mitsubishi Corporation views
the Lawson Group as an essential
consumer interface that provides all its
businesses with valuable knowledge.
Close cooperation with Lawson,
which responds adeptly to rapidlychanging consumer trends, has createdunprecedented business opportunities
for Mitsubishi Corporation, which
overlooks the industrial structure asa whole from high upstream in the
product value chain. The ability to use
AI and other technologies to analyze
purchasing data gathered from 10 million
customers a day has enabled Mitsubishi
Corporation to conceive new measuresand businesses. In my heartfelt belief inLawson’s future as a “Hot Station (Best
Relief Hub) in Our Communities” setapart from other convenience stores, I
will continue my unstinting support for
Lawson as an employee of Mitsubishi
Corporation, and spareno effort in my capacity
as one of Lawson’s
Directors.
*A service using Lawson’s
distribution network to return
rental items and products
purchased through EC

Dialogue with our communities conducted through three years ofoperational reforms has provided the basis for Lawson’s unique character.

I can hardly wait to see where Lawson will lead the industry in
the “Convenience Store 3.0” era.

Emi Osono

Miki Iwamura

Outside Director

Professor, The School of International Corporate Strategy at theGraduate School of Business Administration, Hitotsubashi University

I believe competition in the convenience
store industry has shifted its focus
from quantity to quality. With shoppingand service activities migrating online,
convenience stores are being required toreconsider the unique value brick-andmortar stores can offer, while raising theefficiency of their value chain as a whole.
Lawson has responded to thischallenge by conveying Three Promises:
The Superior taste, with a larger
meaning extending beyond food andbeverages to encompass every aspectof consumer lifestyles; Human kindness;and Environmental (Machi) friendliness.
These promises express the Company’s
strong commitment to its communities.
Since the roles convenience storesare expected to play vary with thecommunity, input from the franchiseowners who know their community bestis of particular importance. Lawson
moved long ago to create opportunities
for dialogue between franchise owners
and Headquarters. This has engendereda variety of initiatives crafted to support
individual stores’ efforts to fit into theircommunity. I believe this is the source of
Lawson’s unique appeal.
I will enjoy seeing Lawson express
its character in the banking business. It
will undoubtedly offer financial services
that respond accurately to individual
customers’ needs through linkage with

LAWSON stores’ tangible products andservices.
The recently introduced foodwaste reduction program is also an
excellent idea. There is so much more
we can do to reduce food waste. We
must determine our priorities and bringthem swiftly to reality. Lawson’s stancetoward realizing the SDGs, including its
introduction of paper cups to reduce thevolume of plastics it uses, will continue toattract attention in the future.
I have the highest admiration forthe operational reforms Lawson has
implemented over the past few years.
Together, they have constructed to build
up “core strength” to support future
growth. The next step will be to produce
results. I will look forward to seeing the
new value offered by this “Hot Station(Best Relief Hub) in Our Communities”
through new experiences that makepeople happy.

Outside Director

Vice President, APAC Marketing, CMO Japan,
Google Japan G. K.

The convenience store is entering a newera. If we call the model imported fromthe United States “Convenience Store1.0,” the model that took root in Japanwas “Convenience Store 2.0.” Now thatthe customer base has expanded fromyoung men to include women, children
and seniors and the offering has evolved
to encompass services other than
shopping, a new “Convenience Store3.0” format is in demand.
Lawson’s Three Promises havetruly significant meaning for this new era.
Lawson is leading the way in providing
safe, reliable daily food and preserving
the environment of its communities andour Earth.
One reason I rate Lawson sohighly is its positive application of digitaltechnologies to enhance its efficiency
and services. Lawson’s corporate
vision and management policies reflect
a strong awareness that technology isfor the people. A second reason is thebrand power Lawson has acquired bydeveloping original products such as
desserts and onigiri rice balls. NATURALLAWSON and SEIJO ISHII are also firmly
established store brands.
Lawson is also rapidly advancing
its ESG activities. Environmental
initiatives such as its measures toreduce plastic use and food loss, alongwith its strong support for franchise37
LAWSON INTEGRATED REPORT 2019owners, demonstrate a clear awarenessof its social responsibilities and of theimportance of friendly relations with thecommunity and its residents.
Now in my second year as an
Outside Director, I remain surprised by
the open atmosphere on the Boardof Directors. I participate actively
in discussions of various aspectsof management, branding, digitalapplication and overseas expansion fromthe perspective of marketing, which is myarea of expertise. I also make proposals
concerning product development fromthe female consumers’ standpoint.
Lawson is determined to do theright thing for customers, franchiseowners, the global environment andfuture generations. I want to see
Lawson respond to this businessenvironment of precipitous change with
continued positive efforts to realize the“Convenience Store 3.0” era.

Corporate Governance
Characteristics and system of Corporate Governance

Characteristics of Corporate GovernanceWe pursue continuous improvement in the value
we offer stakeholders that contributes to enhanced
corporate value. These concerns make it all
the more important for us to comply with laws,
regulations and social norms, while also striving toreinforce our corporate governance by improving
the soundness and transparency of management
through compassionate behavior based on both
our Corporate Philosophy and the Lawson Codeof Ethics. It also requires active disclosure inaccordance with the “Basic Principles Concerning
Information Disclosure.”
Lawson selects people with different
specialties and experience as candidates for
directorships to assure diversity on the Board of
Directors and enable appropriate decision-making
and supervision. In addition to the independence
standards determined by the Tokyo Stock
Exchange, Inc., Lawson has established its own
Judgment Criteria Regarding Independence as abasis for selecting several independent officers forpurposes of ensuring management transparency
and fairness.
As concerns the number of directors, theArticles of Incorporation specify that there shall be
no more than eleven. Thus, we have constructeda system that enables full consideration anddeliberation by the Board of Directors at their
meetings without lessening their responsibilities.
By introducing the Executive Officer System,
meanwhile, we have divided management andsupervision from business execution to enable
quick decision-making and business execution. Itshould be noted with respect to the auditors that
we elect candidates for the position of corporate
auditor based on their possession of the extensive
financial, accounting, risk management and/or
legal expertise and experience required to fulfill
auditors’ duties.
The Company recognizes that thesuccession plan of the CEO is one of our key
management issues; thus, acting as an advisory

Corporate Governance Codebody to the Board of Directors in order to augment
the impartiality, timeliness, and transparency ofthe process, discussions are carried out among
members of the Nomination and Compensation
Advisory Committee, comprised only from parttime officers (five members out of the total
six are independent officers), upon which thequalifications and attributes required as theCompany’s chief executive as well as the methodof nominating the successor are presented by the
President and CEO, Representative Director to thesaid committee for further discussion.
Although Lawson became a consolidated
subsidiary of Mitsubishi Corporation on February
15, 2017, from the perspective of protectionof minority shareholders, we will continue ourefforts to assure appropriate governance as anindependent listed company.

[Five general principles]
1.	Rights and equality of shareholders

and transparency

2.	Appropriate collaboration with stakeholders
other than shareholders

4.	Board of Directors’ responsibilities
5.	Dialog with shareholders

3.	Ensuring appropriate information disclosure
The Corporate Governance Code (CG Code) is a set of guidelines applied to listed companies
as of June 2015. Lawson implements all five basic rules specified by the Code. Lawson’s efforts
are also published in various reports, including corporate governance reports, meeting notices toshareholders and securities reports. Please visit the following site to see the content of disclosure
items related to the individual rules in the CG Code.
For details of the Corporate Governance Code:https://www.lawson.co.jp/company/corporate/system/
governance/pdf/governance_201905.pdf(In Japanese only)

Details of major corporate governance measures implemented since 2000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Board of the Directors
membership (number)
Outside directors (number)

18

20
2

8

9

3

5

7

9*

3

Of which independent
officers (number)

4
1

3

5

2

1

Female directors (number)

8

3
2

3
2014 – Nomination and Compensation
Advisory Committee established.

2002 – Compensation Advisory Committee established.
2005 – Directors’ retirement benefit system abolished.

Ensuring transparency of
directors’ compensation2005 – Share-based stock compensation options for directors introduced.
2012 – Auditors’ retirement benefit system abolished.

Ratio of shares heldby Mitsubishi Corporation(major movements)

2001 Mitsubishi Corporation becomes largest shareholder.

April 2015

33.4%

February 2017

50.1%

*The membership of the Board of Directors is as of the close of the General Meeting of Shareholders each year, except for 2014, when there were 9 members up to July 31 and 8 members after August 1.

38
LAWSON INTEGRATED REPORT 2019

Special circumstances withthe potential to seriously
impact corporate governance
Mitsubishi Corporation assumed ownershipof 50.1% of Lawson’s voting rights througha tender offer conducted during the period
from December 2016 to February 2017, andLawson became a consolidated subsidiaryof the Company as of February 15, 2017.
Mitsubishi Corporation cooperates with
Lawson in human resources exchanges
and raw materials procurement as well as insharing of information on retail properties andother matters based on a comprehensive
business alliance. Lawson makes management
decisions independently, however, in its
capacity as a listed company.

Corporate Governance System
to fill 5 of the 6 positions as Committee
members, thus creating a system that canmake recommendations with a high degreeof independence. Going forward, we willcontinue our efforts to ensure managementtransparency and independence, andto improve corporate value to meet the
expectations of all our stakeholders.

diversity with the composition of the executive
officers taken into consideration. They arecontributing to reinforcing the corporate
governance system from various perspectives.
Following the voluntary establishment of theNomination and Compensation Advisory
Committee to recommend candidates forthe positions of director and representative
director on the Board of Directors, meanwhile,
independent officers have been selected

Equipped with an agile decision-making
process, Lawson has moved quickly toconstruct a highly transparent and independent
corporate governance system. Six independent
officers who are considered to have no conflictof interest with the general shareholders
comprise half the total of 12 directors andcorporate auditors. Four women have been
appointed to the positions of director or
corporate auditor with a view to promoting

Board of Directors
member (Inside)

Outside director(Independent)

InsideauditorOutside auditor(Independent)

General Meeting of Shareholders
Appointment/
removalNomination andCompensation
Advisory Committee

Appointment/
removalBoard ofDirectors

Consultation

Audit

Appointment/
removalAudit &
Supervisory
Board

Recommendation

Certified public
accountant
Financial audit

Appointment/removal/
supervision

Business
execution organization

Audit
RemovalDiscussion/report

Audit

President
Financial Reporting
Internal Control Committee

Internal Audit Division

Management meeting

Internal audit and guidance
for improvements

CR Executive Officer*
Compliance & Risk
Management Committee

Business/corporate divisions
Funding

Affiliated companies

39
LAWSON INTEGRATED REPORT 2019

Formulation and promotion of compliance andrisk management measures*Compliance and Risk Management Executive Officer (See page 42.)

Lawyers
Opinions

Corporate Governance
Characteristics and system of Corporate Governance

Basic policy for determining directors’ compensation
Lawson’s policy is to design its remuneration
system in a manner that links directors’compensation with returns to shareholders,
while retaining its function as an incentive forenhancement of corporate value, continuous
growth and improvement of corporate
performance and ensuring a sufficient andappropriate level of remuneration to reward
individual directors for the duties they perform.
The base compensation includes a variable
compensation component linked to theCompany’s performance, moreover, as well
as a fixed compensation component. To
reflect the directors’ contribution to improving
shareholder value more accurately, variable
compensation is linked to such earnings
indicators as EPS (earnings per share). Sharebased stock options—share price-linked
compensation—are also incorporated as partof the remuneration to strengthen the linkage
with returns to shareholders.

A

B

Details of directors’ compensation
Directors’ compensation paid by Lawson
consists of (A) base compensation throughcash payments and (B) share pricelinked compensation through stock option
allocations.
Note that no performance-based variable
compensation is paid to part-time directors,
because they serve the representative directors
and Board of Directors in a specialized
supervisory and advisory capacity.

Details of auditors’ compensation
Auditors’ compensation is determinedaccording to a basic policy of paying
compensation at a sufficient and appropriate
level in consideration of the duties performed
by individual auditors. It comprises basecompensation (fixed compensation)
paid in cash. The amount is determinedthrough consultation with the auditors, withconsideration given to such factors as full-timeor part-time status and share of the auditing
work, within a range approved by the General
Meeting of Shareholders.

The construction and maintenance of aninternal control system is considered an
important issue for management to ensure
healthy, sustainable business growth. In
accordance with the provisions of the Financial
Instruments and Exchange Act, in addition
to the Companies Act and Ordinance for
Enforcement of the Companies Act, a Basic
Policy for Maintaining the Internal Control
System is determined each fiscal year (seepage 42).
These policies are subject to frequent
revision in accordance with changes in thebusiness environment in order to ensure theeffectiveness, efficiency and appropriatenessof business. Efforts to develop an effective,
rational internal control system contribute tomaintaining and increasing corporate value.

Disclosure method for directors’compensation
Total amounts of officers’ compensation arelisted in the Company’s securities reports andbusiness reports.

Details of officers’ compensation (fiscal 2018)
Total compensation, total amounts by type ofcompensation and number of eligible directors
per company director category

Directors’ compensation

A Base compensation

Consisting of: fixed compensation (about 60%)

Status of internal control
system development(Millions of yen)variable compensation (about 40%)

Fixed compensation: A fixed amount commensurate with the position determined based on internal rules
Variable compensation: Performance-based remuneration linked to the Company’s performance, including EPS (earnings per
share), in the fiscal period concerned (To ensure linkage between directors’ compensation and shareholders’ interests)
B Share-price linked compensation

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

Category

Total by type ofcompensation
Total
compensation
Base
Stock
compensation options

Numberof eligible
officers

Directors

220

166

53

9

(of which outside directors)

(34)

(30)

(4)

(4)

Auditors

74

74

—

4

(of which outside auditors)

(49)

(49)

—

(3)

Total

294

240

53

13

(Note) There were 8 directors and 4 auditors as of end February 2019.

Exercise price per share: 1 yen
Number of shares allocated: Determined according to the number of shares allocated in accordance with the director’s
position and the rate of achievement of the EPS target.
Exercise period: Exercisable only within a predetermined period after leaving the Company(Not exercisable during tenure in office)40
LAWSON INTEGRATED REPORT 2019

Policy on nomination and standards for appointment and independence of candidates for director
Lawson has established criteria for appointing
officers and for making judgments regarding
independence. The Nomination andCompensation Advisory Committee serves
as an advisory body, moreover, that makes
recommendations to the Board of Directors
regarding nominations of candidates forthe positions of director and representative
director. Since 5 of the 6 members are currently
independent officers, this system also enables
the Committee to make recommendations
with a high degree of independence. It
should be noted with respect to candidates
for auditor that they are individuals with thefinancial, accounting, risk management and/or legal experience and expertise required tofulfill the duties of auditors whose candidacy isapproved by the Audit & Supervisory Board.
<Appointment criteria for officers>	Persons whose views resonate deeply with
the Lawson Group’s Corporate Philosophy,“Creating Happiness and Harmony in Our
Communities.”<Judgment criteria regarding independence>	A major business partner of the Lawson
Group or its business executors: A group ofbusiness partners that provides products orservices to the Lawson Group, the amountof which group’s transactions with theLawson Group in the previous business year
exceeds 2% of the consolidated sales of thegroup of business partners concerned.
	A major business partner of the Lawson
Group or its business executors: A groupof business partners to which the Lawson
Group provides products or services,
the amount of the Lawson Group’stransactions with which business group in
the previous business year exceeds 2%of the consolidated sales (gross operating
revenues) of the Lawson Group.
	Consultants, accounting experts and legal
experts who have received large sums ofmoney and other assets other than executive
compensation from the Lawson Group:
Consultants, accounting specialists such as
CPAs and legal specialists such as attorneys
who receive money and assets other than	Persons who can to contribute tosustainable growth of the Lawson Groupand enhance its corporate value.
	Persons with good mental and physicalhealth that will not interfere with pursuit of
their corporate duties.
	Respected persons with dignity andhigh ethical standards who comply
conscientiously with laws and regulations.
	Persons capable of making objective
judgments, and endowed with excellent
foresight and insight.
	Persons possessed of a wealth ofexperience and expertise in corporate
management or specialized fields.
	Persons who are able to ensure sufficient
time to conduct their duties.
	Persons to whom none of the grounds fordisqualification specified in the Companies
Act apply.
	As concerns independent officers, persons
in compliance with the Judgment Criteria
Regarding Independence stipulated by
Lawson.

Board of Directors and Audit & Supervisory Board meetings
held and attendance rates
Number of meetings held
Attendance rate

Board of Directors

Audit & Supervisory Board

14 times

16 times

Outside directors

90.5%

—

Outside auditors

100%

100%

Assessment of the Board of Directors’ EffectivenessIn order to further enforce the effectivenessand functions of the Board of Directors, theCompany conducted a “self-assessment on
the effectiveness of the Board of Directors,”
mainly consisting of a document survey to becompleted by outside directors and corporate
auditors. The document survey was submitted
by all seven members (five non-businessexecuting members of the Board and two parttime outside corporate auditors), after which
the results of the collected data and analyses
were discussed at the meeting of the Boardof Directors. It was observed that the current
Board of Directors of the Company is enforcing

Related sites
For details of basic principles concerning information disclosure

http://www.lawson.co.jp/company/corporate/system/disclose/
For details concerning trade policies

http://www.lawson.co.jp/company/corporate/system/torihiki/

executive compensation from the Lawson
Group, and whose remuneration from theLawson Group has amounted to 5 million yen
or more annually for the past two years.
	Major shareholders of Lawson (in cases inwhich the major shareholder in question isa corporation, the corporation’s businessexecutors).
	Close relatives of the business executors of
the Lawson Group.
	Close relatives of non-business executing
members of the Board or accounting
advisors of the Lawson Group (in the case ofoutside corporate auditors).
	Outside directors and outside auditors
whose tenure at the time of reappointment
exceeds 8 years and 12 years, respectively,in the aggregate.
Note that even a person who fits any of theabove criteria can be selected as a candidate
for independent outside officer if the Boardof Directors determines that said person isvirtually independent. In such case, the reason
is explained and disclosed at the time of thecandidate’s appointment as outside officer.

(In Japanese only)

41
LAWSON INTEGRATED REPORT 2019

effectiveness through its role in the resolutionof important management matters and theappropriate monitoring of business execution.
At the same time, in order to further reinforce
effectiveness, constructive opinions were also
exchanged at the meeting of the Board of
Directors regarding the provision of information
to outside directors and the improvement ofmatters to be reported in the monitoring roleof the Board of Directors. Moving forward, we
will endeavor to make improvements to further
enhance the effectiveness of the Board of
Directors, as well as ensure that the opinions
discussed are considered.

Corporate GovernanceCompliance and Risk Management

Internal control
Basic policy regarding the internal
control system

Lawson’s internal control system (as of June 1, 2019)

With the convenience store business at
its core, the Lawson Group’s business
operations range from high-end supermarket
and entertainment-related businesses tofinancial, e-commerce, and consulting
services, together with LAWSON stores inevery prefecture in Japan, as well as several
stores overseas. The Group provides a wide
variety of products and services, as such, weare not only required to observe various laws
and regulations but also must assess thediverse range of possible risks and implement
the appropriate countermeasures. In light ofthese characteristics, Lawson has establishedthe “Basic Policy for Maintaining the Internal
Control System” to support its efforts toachieve healthy, sustainable growth. We arepromoting maintenance of our internal control
system based on this policy, while responding
to changes in our management environment,
conducting periodical reviews of the policy
itself, and endeavoring to maintain andenhance an effective, practical internal control
system.
The main revisions of the aforementioned
Basic Policy implemented in fiscal 2019 aredescribed below:

Audit &Supervisory
Board

Internal control audits/regular meetings

Auditors

Reports on important issues

A management system of affiliated companies
has been established, clearly defining that themeasures to appropriately operate the said
system be reinforced.

President and CEO

CR Executive Officer*1
Compliance & Risk Management Committee
Compliance & Risk Management Committee Meeting
Mutual understanding/information exchange einforcement of the system to ensure theRappropriate operations of affiliated companies

Board of Directors• Food Safety and Hygiene
Management Subcommittee• BC Subcommittee• Regional Office Crime Prevention
and Disaster Defense Subcommittee• CSV*3 Subcommittee

Compliance &Risk Management OfficeInformation Security
Management OfficeInformation Security Management Committee

CRO*2 (Divisions and Areas)

Information Security Committee Meeting
Emergency Risk Management Committee(Emergency circumstances)
Internal Audit Division

Affiliated companies
Affiliated Company Compliance Officers Meeting

Internal
control audits

Close communications/basic management policy

Guidance/
supportFranchise
stores

*1 CR Executive Officer: The executive with overall responsibility for the development and implementation of a framework for identifying misconduct and problems concerning legal compliance andpreventing risks from arising*2 CROs (Compliance and Risk management Officers): Persons responsible for compliance in the various 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 arising*3 CSV (Creating Shared Value)

42
LAWSON INTEGRATED REPORT 2019

Lawson’s compliance and risk management system
Lawson has established a compliance and risk
management framework based on its Corporate
Conduct Charter and Code of Ethics. We seek
to conduct business as a good corporate citizen,
acting honestly and considerately according tohigh ethical standards, implementing the PDCA
(Plan-Do-Check-Action) cycle, and organicallylinking our behavioral standards with our
education and training programs, communication
functions and monitoring activities.

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

Departmental
enlightenment
activities conductedby leaders

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 response

Post-emergency review

Education, training, practiceFormulation of behavioral standards
We have established the Code of Ethics, Lawson
Group Privacy Policy and Lawson Group
Purchasing Policy to ensure proper conductof business throughout the Group. We havecompiled these in
the “Lawson GroupC&R Handbook”
and distributed it toall our employees
to attain theirunderstanding of
Lawson Group C&R Handbook
the policies.

Appointment of CR promotion officers
We have appointed an executive officer
responsible for CR (compliance and risk)
with responsibility for promoting complianceand risk management. Compliance and risk
management officers (CROs) assigned to eachdepartment at headquarters and the regional
offices are tasked with establishing and raisingawareness of compliance measures and risk
countermeasures in their respective departments
and with contributing to creation of a culture thatemphasizes compliance with social norms.

Full implementation of education andtraining
Lawson conducts compliance and risk
management training for all its employees eachyear for the purpose of improving their ethicalawareness and risk response capabilities. It
has developed a training system to support
structured, systematic learning, moreover, thatbegins with training of newly recruited employee
and extends to training of newly appointed
management personnel and specialized
occupational training as well as biannualcompliance 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 to businessenhancement. We are currently reviewing the
program contents in light of our changing risk
environment.

Establishing and raising awareness of
the Consultation/Whistleblower Hotline
In addition to Human Resources Department
personnel who specialize in consulting concerning
sexual harassment and abuse of power and legal
personnel who provide consultations on legal

matters, Lawson has established consultation
contacts to receive internal notifications andprovide consultations concerning compliance andrisk management issues. Besides establishing
the Lawson Group Outside Consultation/
Whistleblower Hotline involving law firms andother external organizations, it has created aframework for providing business partners’
employees with anonymous consultations.
Lawson is working harder today thanever to increase awareness and understandingof these services and frameworks bycommunicating about them with employees andother concerned parties.

Reinforced operational management andmonitoring
Lawson has established the Compliance and Risk
Management Office and the Information Security
Management Office and staffed them withspecialized personnel under the direction of the
CR Executive Officer. As the entities responsible
for promoting and assuring compliance as well
as for conducting risk management, theseoffices serve as cross departmental secretariats
for the Compliance and Risk Management
Committees Meeting and Information Security
Committees Meeting and manage the progressof measures implemented in these areas byindividual departments throughout the Group.
Four separate subcommittees (the Food Safety
and Hygiene Management Subcommittee, theBC Subcommittee, the Regional Office Crime
Prevention and Disaster Defense Subcommittee,
and the CSV Subcommittee) have been
established under the Compliance and Risk
Management Committees Meeting and tasked
with managing the progress of importantmeasures while preventing the emergence ofrisks.
The subcommittees collaborate with the
Corporate Auditors Office, moreover, receiving

43
LAWSON INTEGRATED REPORT 2019

reports on the results of compliance audits asneeded while also providing detailed guidance for
implementing measures and offering proposals
for improvements.
Besides awareness surveys involving all theemployees, the monitoring activities extend tocirculation of questionnaires among business
partners concerning such matters as delivery ofmerchandise to stores and store construction aspart of efforts to review the compliance systems
from a broad perspective.

Enhanced cooperation among Group
companies
Officers responsible for compliance and risk
management have been appointed by the Group
companies as well, and Lawson also holds
meetings of affiliated companies’ complianceofficers. Besides formulating codes of ethics
and providing training to heighten employee
awareness, it conducts the same employee
awareness surveys and business partnerquestionnaires at the Group companies as at
Lawson. The Corporate Auditors Office conducts
audits of operational duties at the Group
companies, whose boards of auditors convene
meetings to provide guidance and assistancein establishing and improving their compliance,risk management and information security
frameworks.

Group officer training

Corporate GovernanceCompliance and Risk Management

Responses to emergencies

Assuring continuity of business operations

Lawson places particular emphasis on“food safety and hygiene management,”“information security” and “disaster relief,” andit has prepared a structure for responding toemergencies and resolving problems rapidly.
Meetings of the Compliance and Risk
Management Committee and the Information
Security Committee as well as of the four
subcommittees are convened under ordinary
circumstances to assess risks and toformulate and promote measures to avoid
them and prevent their occurrence. Shoulda serious risk situation arise, an Emergency
Risk Management Committee is organized toresolve issues swiftly and minimize damage.
Once the problems have been resolved, theCompany analyzes the factors contributing tothe occurrence and reviews and improves therelevant measures to prevent any recurrence.
We are reinforcing our emergency
response capabilities, moreover, throughefforts such as formulating the BusinessContinuity Plan (BCP) and implementing
disaster mitigation measures. Our aim is toinstitute a business continuity (BC) frameworkthat prevents interruption of important businessactivities, even when emergencies involving
serious damage occur.

Fundamental policies andobjectives for maintaining business
continuity (BC)Interruption of important business activities
shall be avoided, even when 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 toavoid undermining our customers’ satisfaction
or corporate value.

Three main goals for maintaining BC	Fulfilling Lawson’s mission as a “community lifeline”
We will endeavor to ensure uninterrupted provisionof products and services to customers by keeping
stores open whenever possible.
	Continuation of the franchise (FC) businessWe will determine specific periods and methods forresuming operations and maintain the requisite levelof FC headquarters operations.
	Securing appropriate earnings
We have implemented measures in consideration of
the impact emergencies could exert on earnings andof social conditions in order to secure an appropriate
level of earnings necessary to the Company’s survival.

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

“Resilience certification”
Lawson is certified as an enterprise that contributes to the building of national resilience against disasters.
In the spirit of building national resilience against disasters, the government’s National Resilience Promotion Office,Cabinet Secretariat established a system for “certifying groups contributing to the building of national resilienceagainst disasters (resilience certification).” This system certifies businesses that are actively
engaged on a regular basis in efforts related to BC in preparation for large-scale natural
disasters and so on as “organizations contributing to the building of national resilience against
disasters.” The February 2016 “Guidelines relating to certification of groups contributing to
the building of national resilience against disasters” were enacted by this office. Lawson hasreceived confirmation from the National Resilience Promotion Office, Cabinet Secretariat to theeffect that it conforms to the “requirements of a certified organization” stipulated by theabove guidelines. Lawson was recognized by the Association for Resilience Japan as the first
convenience store to contribute to the building of national resilience against disasters.

Mechanism for enhancing BC
capabilities
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 businesscomponents as “hardware” factors involving
office buildings and lifelines, “software” factors
involving its BCP and manuals, and “skills”
factors involving employees and FC stores.
The Company uses its findings to implement
improvements in crisis response capabilities
throughout the Group.

Formulation of the Disaster Relief
Manual and BCP Guidelines
Lawson has formulated the “Disaster Relief
Manual” based on the disaster relief policy,
defining the approach toward disaster relief andthe standard of conduct of the organizationand its employees in the event of a disaster.
There are different versions of the manual,“Concept of Operations,” “Initial Actions,”
and “Response and Recovery Actions,” inwhich the response rules and procedures formeasures according to the disaster level for
all employees and the entire organization are
described.
Additionally, in the event of a major
incident impacting the headquarters
operations, to ensure the continuance ofimportant business activities as the franchiseheadquarters, we have formulated the “BCP
Guidelines” based on the Business Continuity
Plan, defining the organization’s standardof conduct. The BCP Guidelines describes
the basic plans of the business plan and thecourse of action in the occurrence of the Tokyo
Inland Earthquake and the appearance of a
new strain of the influenza virus.

44
LAWSON INTEGRATED REPORT 2019

Disaster preparedness andresponse
When large-scale disasters occur, our first priority
is to confirm the safety of Lawson employees
and our FC owners and crews. Lawson
conducts Companywide training three times ayear in which participants acquire experience in
implementing a variety of measures, including
responding by telephone, email and disastermessage dialing and applying the safety checksystem. This prepares every individual to respondsmoothly should emergencies arise. Manuals
elucidating the requisite disaster preparedness
and responses are distributed to the stores.
When disasters occur, disaster relief
headquarters are set up immediately in threelocations in the affected area: headquarters,
regional offices and local sites. Lawson takes
advantage of a Disaster Information Map Systemdesigned to enable personnel to confirm thedisaster situation in real-time and implement
support measures for shops, factories anddelivery centers, so that stores in the disaster area
can be reopened for business at an early date.

Disaster relief
manual

BCP manual

Disaster Information Map System
A comprehensive Disaster Information Map System for
mapping disaster information in real time. The information ismonitored and collected 24 hours a day, 365 days a year.

Cooperation with local
governments at times of disaster
In its capacity as a community lifeline, Lawson ismaking progress toward concluding agreementswith local governments concerning cooperation in
the provision of goods and assistance to stranded
commuters in times of disaster.
<Entities concluding agreements onprovision of goods in times of disasters>
Local governments: 47 prefectures,
20 cities and wards
Others: Tokyo Fire Department andJapan Ground Self-Defense Force
Mass transit systems: 10
Electric power companies: 4<Entities concluding agreements
on assistance to stranded commuters>
Local governments: 43 prefectures,
10 ordinance designated cities(As of June 1, 2019)

Improvement of the information security framework
The “Lawson Group Privacy Policy” has beenformulated to promote protection of personal
information. To ensure that the relevant
personnel understand specific details of thecontents 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,in various manuals produced for the storesin an effort to raise awareness. Headquarters
employees are tested periodically to ensurethat they are all acting reliably based on the“Lawson Office Security Rules,” in whichmatters to be observed are compiled.

An onsite or documented inspection isconducted annually, moreover, to ensure thatthe conditions are maintained.
We are also evaluating our information
security framework from a variety of otherperspectives to ensure that it remains robust
by implementing information security audits by
our internal audit departments and employing
specialized outside companies to carry out
surveys of office security and diagnose any
vulnerabilities in our information systems.

We have established a system forspecifying methods of gathering andstoring information as well as information
storage periods and for designating persons
responsible for handling customers’ valuable
information in each instance after advancechecking by specialist departments.
When consigning responsibility for storing
personal information to outside organizations,
we require that a detailed investigation of
the organization’s security framework be
conducted in advance and that consignmentof the responsibility be made only toorganizations that satisfy Lawson’s conditions.

Crime prevention at stores onclusion of agreements on
Cprovision of goods in times of disasterand agreements on assistance tostranded commuters
Conclusion of agreements onprovision of goods in times of disaster*Map shows only prefectural-level agreements.

Appointment to the designated public
institution based on the Disaster
Countermeasures Basic Act

As of July 1, 2017, Lawson was appointed
a designated public institution by the Prime
Minister based on Article 2, Item 5 of the Disaster
Countermeasures Basic Act. During times ofnormal operation, the Company formulates disasterprevention work plans, conducts disaster drills andstockpiles goods and materials in preparation forplaying an important role in disaster prevention,
emergency response and restoration. In so doing,
it works closely with the relevant government andmunicipal offices.

A disaster prevention drill (held March 11, 2018)

We conduct education to ensure that store personnel act with the highest priority placed on personal safety and with crime prevention in mind, in ways such as
greeting customers in a cheerful and spirited manner. In addition to the following measures implemented by headquarters, we are cooperating with the police 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 leadto the arrest of perpetrators in the unlikely event
an incident should occur. We have upgraded to adigital security camera system, moreover, which
provides sharper images and improved recording
capabilities.

A DVD on measures to prevent robberies
and other crimes

2. Creation of an environment for store
crew education

Reminders to raise awareness of crime
prevention are distributed for display on POS
cash registers and store computers, and crime
prevention DVDs are also delivered to storesfor use in educating their crews. Various tools
and manuals, such as crime prevention selfcheck lists, have also been prepared.

A crime prevention self-check list

45
LAWSON INTEGRATED REPORT 2019

3. Enhancing guidance provision during patrols

In addition to the regular store patrols, crime prevention
guidance is also provided during late-night and crime
prevention patrols to raise awareness at franchise stores.

4. Conducting crime prevention drills

Employees are trained under police direction inmethods of responding to robberies, including throwingof anti-crime color paintballs.
In recent years, we have also been conducting
special fraud prevention drills.

Training in responding to robbers

Training in anti-crime color paintball
throwing

Corporate Governance
Eleven-Year Financial Summary(Millions of yen)

2018

(Fiscal year)

2017

2016

2015

For the year:
Gross operating revenues
		 Franchise commissions from franchise stores
		Net sales
		Other
Total operating revenues
Operating profit
Net income attributable to owners of parent
Net cash provided by operating activities
Net cash used in investing activities
Net cash used in financing activities
Capital expenditures
Depreciation and amortization 2

¥
		
		
		
		
		
		
		
		
		
		

302,136
288,579
109,931700,647
60,781
25,562
128,594(81,017)
277,937
140,071
66,844

¥
		
		
		
		
		
		
		
		
		
		

289,232
264,734
103,357
657,324
65,82026,828113,938(91,209)(61,238)
140,495
58,601

¥
		
		
		
		
		
		
		
		
		
		

275,312254,169
101,806
631,288
73,77236,40099,864(76,227)(25,638)
119,784
56,199

¥
		
		
		
		
		
		
		
		
		
		

261,681
227,606
94,166
583,453
72,542
31,381
112,205(68,657)(50,201)
106,747
49,293

¥
		
		
		
		
		

1,342,490
281,98220.6%
354,236
14,65910,395

¥
		
		
		
		
		

900,256
281,44630.6%
30,12013,992
10,028

¥
		
		
		
		
		

866,577
285,995
31.7%
67,692
13,111
9,403

¥
		
		
		
		
		

803,212272,997
32.9%
69,793
12,395
8,377

¥
		
		

255
255
99.7%

¥
		
		

268
255
95.1%

¥
		
		

363
250
68.7%

¥
		
		

314
245
78.1%

		
		

9.3%
2.3%

		
		

9.7%
3.0%

		
		

13.5%
4.4%

		
		

12.0%
4.0%

¥
		

2,233,738
51,569¥		

2,069,609
91,075¥
		

1,958,550
84,736¥
		

1,880,395
79,872

		
		
		
		
¥
		

1,202,619
544,530
329,545
208,6122,285,308
2.5%

		
		
		
		
¥
		

1,138,966
509,415
314,481
197,821
2,160,684
2.9%

		
		
		
		
¥
		

1,073,044
481,267
294,141
194,833
2,043,287
3.4%

		
		
		
		
¥
		

1,033,449
463,432
276,886
186,500
1,960,267
3.5%

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)
Per share data:
Net profit (yen/ U.S. dollars 1)
Cash dividends (yen/ U.S. dollars 1)
Payout ratio
Financial data:
Return on equity (ROE)
Return on assets (ROA)
Net sales by all stores(Domestic convenience store business ):Net sales by store format 3,4		Franchise stores
		Company-operated stores
Net sales by product category 3,4
		Processed foods
		Fast foods
		 Daily delivered foods
		Non-food products
Net sales by all stores
Ratio of operating profit to net sales by all storesNotes: 1. The U.S. dollar amounts represent Japanese yen exchange rate against the US dollar as of February 28, 2019 ($1 = ¥110.87).
2. These figures include depreciation and amortization of intangible assets.
3. These figures include sales reported by franchise stores and are unaudited.
4. Net sales for the fiscal years 2016, 2017, and 2018 represent sales by stores operated by Lawson, Inc. as well as those by Lawson Sanin, Inc.

46
LAWSON INTEGRATED REPORT 2019

*Japanese yen figures are rounded down to the nearest million yen. US dollar figures are rounded to the nearest thousand dollars.
(Millions of yen)

2014

2013

2012

(Thousands of U.S. dollars 1)

2011

2010

2009

2008

2018

¥
		
		
		
		
		
		
		
		
		
		

247,681
174,044
76,188497,91370,482
32,687
110,568(100,434)(3,289)141,251
41,826

¥
		
		
		
		
		
		
		
		
		
		

242,079
168,159
75,010485,248
68,12737,966
81,503(47,924)(39,650)
84,03247,889

¥
		
		
		
		
		
		
		
		
		
		

230,003
192,942
64,500487,445
66,24633,18385,189(54,196)(31,980)
77,36143,886

¥
		
		
		
		
		
		
		
		
		
		

215,574
208,063
55,320478,957
61,76924,88586,357(52,912)(27,545)
74,572
37,846

¥
		
		
		
		
		
		
		
		
		
		

197,673
192,330
51,275441,278
55,541
25,387
72,210(30,522)(28,799)
50,32633,084

¥
		
		
		
		
		
		
		
		
		
		

185,656
233,694
47,842
467,192
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
20,879

$
		
		
		
		
		
		
		
		
		
		

2,725,138
2,602,868
991,539
6,319,545
548,227
230,775
1,159,872(730,748)
2,506,873
1,263,380
602,904

¥
		
		
		
		
		

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

¥
		
		
		
		
		

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

¥
		
		
		
		
		

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

¥
		
		
		
		
		

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

¥
		
		
		
		
		

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

¥
		
		
		
		
		

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

¥
		
		
		
		
		

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

$
		

12,108,685
2,543,357

		

3,195,057

¥
		
		

327
240
73.4%

¥
		
		

380
220
57.9%

¥
		
		

332
200
60.2%

¥
		
		

249
180
72.2%

¥
		
		

255
170
66.8%

¥
		
		

127
160
126.3%

¥
		
		

240
160
66.6%

$
		

2.30
2.30

		
		

13.0%
4.7%

		
		

16.1%
6.3%

		
		

15.2%
6.0%

		
		

12.0%
4.9%

		
		

12.8%
5.5%

		
		

6.5%
2.8%

		
		

12.5%
5.7%

¥
		

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$
		

20,147,361
465,130

		
		
		
		
¥
		

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%

		
		
		
		
$

10,847,109
4,911,427
2,972,355
1,881,591
20,612,501

47
LAWSON INTEGRATED REPORT 2019

Corporate Information

Corporate Data As of February 28, 2019/Consolidated
Company name
Headquarters

Main Lawson Group Companies As of February 28, 2019/Consolidated
Business activities

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

Franchise chain development of LAWSON,
NATURAL LAWSON and LAWSONSTORE100
Net sales for all stores ¥2,424.5 billion (consolidated)
Number of stores
17,015 (worldwide)
Operating areas
All 47 prefectures in Japan, China(Shanghai, Chongqing, Dalian, Beijing, Wuhan, Hefei), Indonesia, Hawaii, Thailand,
Philippines

President and CEO,
Representative Director, Sadanobu Takemasu
Chairman of the Board
Established
April 15, 1975
Capital¥58,506.644 million
Number of employees 10,395 (consolidated)

Note 1:	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.
2:	Among the total number of stores, the number of domestic stores comprises LAWSON, NATURAL LAWSON and LAWSON STORE100 storesoperated by Lawson Inc.; LAWSON stores operated by Lawson Sanin Inc., Lawson Okinawa Inc., Lawson Minami-Kyushu Inc. and Lawson Kochi
Inc.; and Seijo Ishii stores operated by SEIJO ISHII, CO., LTD.
		 The number of overseas stores comprises stores operated under the LAWSON brand by companies in the respective regions.

Category

Domestic convenience
store businessEntertainment
business
Financial services
business
Consulting business

Lawson Bank, Inc.*3
BestPractice, Inc.

Consolidated subsidiary

Overseas business

Lawson (China) Holdings, Inc.
Shanghai Lawson, Inc.

Saha Lawson Co., Ltd.

Consolidated subsidiary(Consolidated subsidiary of
Lawson (China) Holdings, Inc.)(Consolidated subsidiary of
Lawson (China) Holdings, Inc.)(Consolidated subsidiary of
Lawson (China) Holdings, Inc.)(Consolidated subsidiary of
Lawson (China) Holdings, Inc.)
Consolidated subsidiary

SEIJO ISHII CO., LTD.

Consolidated subsidiary

Chongqing Lawson, Inc.

100,300,000

Shareholders

33,658Stock exchange
listings

Tokyo Stock Exchange (1st Section)

1 Mitsubishi Corporation

53.0%

Individuals, others 9.1%

2.2%

17.7%

*1 It is included in consolidation criteria from fiscal year 2018.
*2 Name changed from Lawson HMV Entertainment, Inc. as of June 2018.
*3 Name changed from Lawson Bank Preparatory Company, Inc. as of July 2018.

4.2

3

Japan Trustee Services Bank, Ltd.
(Trust account)

3,392

3.4

2,092

2.1

1,739

1.7

STATE STREET BANK WEST CLIENT —TREATY 505234

6 JP MORGAN CHASE BANK 380655

1,287

1.3

Japan Trustee Services Bank, Ltd.
(Trust account 5)

977

1.0

8 Japan Securities Finance Co., Ltd.

952

1.0

Japan Trustee Services Bank, Ltd.
9
(Trust account 9)

917

0.9

Japan Trustee Services Bank, Ltd.
(Trust account 7)

906

Treasury shares

0.2%

SEIJO ISHII business

4,200

7

Securities companies Foreign entities

50.1

The Master Trust Bank of Japan, Ltd.
(Trust account)5

Other domestic entities

50,1502

4 NTT DOCOMO, INC.

Distribution of shareholders by type
17.8%

Beijing Lawson, Inc.
Number of shares Percentages ofheld (Thousands) total shares held

Shareholder name

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

Financial institutions

Dalian Lawson, Inc.

Major shareholders (Top 10)

409,300,000

Shares issued

10

Consolidated subsidiary
Consolidated subsidiary
Consolidated subsidiary
Consolidated subsidiary
Equity-method affiliate
Equity-method affiliate
Equity-method affiliate
Consolidated subsidiary(Consolidated subsidiary of
Lawson Entertainment, Inc.)
Consolidated subsidiary

Share Information As of February 28, 2019/Non-consolidated
Authorized shares

Name of company

Lawson, Inc.
Lawson Store100, Inc.
SCI, Inc
Lawson urbanworks, Inc.*1
Lawson Sanin, Inc.
Lawson Okinawa, Inc.
Lawson Minami-Kyushu, Inc.
Lawson Kochi, Inc.
Lawson Entertainment, Inc.*2
United Cinemas Co., Ltd.

0.9

*The above percentages of total shares held were calculated after excluding
241,897 treasury stocks.

48
LAWSON INTEGRATED REPORT 2019

Executive Officers As of March 1, 2019
Senior Executive
Jun Miyazaki
Managing Officer
Executive Managing Officer Shuichi Imagawa

Senior Vice President

Zhang Joshua

Senior Vice President

Toshihiko Chihiro

Executive Managing Officer Yuichi Wada

Senior Vice President

Satoshi Kumagai
Hajime Kawamura

Executive Vice President

Motonobu Miyake

Senior Vice President

Executive Vice President

Akihito Watanabe

Senior Vice President

Yasuhiro Izeki

Executive Vice President

Tatsushi Sato

Senior Vice President

Naotaka Honda

Hitoshi Fujii

Senior Vice President

Masayuki Sawada

Executive Vice President

Kazuhiro Wakui(Excluding directors’ additional posts)

Senior Vice President

Yasuhiko Hirokane

Executive Vice President

Store Network Development As of February 28, 2019
Total number of stores (domestic
and overseas total)*1

17,015 stores

Number of domestic stores

Main Businesses and Services As of February 28, 2019

Number of overseas stores

14,805 stores

A neighborhood store "Creating Happinessand Harmony in Our Communities” throughits manufacturing retailer based on a small
commercial area model

2,210 stores

Beijing 108 stores

Dalian 146 stores
Shenyang*3

Chongqing 198 stores
Hefei 20 stores

Thailand 120 stores

Operating companies

Operating company

Lawson, Inc.
Lawson Okinawa, Inc.
Lawson Minamikyushu, Inc.
Lawson Kochi, Inc.
Lawson Sanin, Inc.
Lawson urbanworks, Inc.

Lawson, Inc.

A store that contributes to savings andan easy, convenient daily life by selling a
range of products such as fresh foods,
prepared foods and daily necessities at a
uniform price of 100 yen (excluding tax)

A lifestyle supermarket for people whoare particular about food, providing foodfrom around the world at reasonable world
street corner prices

Operating company

SEIJO ISHII CO., LTD.

Operating company

Lawson Store 100, Inc.

Shanghai 1,227 stores

22 farms nationwide producing fresh fruitand vegetables for Lawson Group stores

Wuhan 308 stores

Operating companies

Changsha*2
Philippines 39 stores

A nearby store supporting “beautiful,healthy and comfortable“ lifestyles basedon the concept of “making the most of
every day”

Individual LAWSON farms

Hawaii 2 stores

Provision of ticket sales services for a
full range of entertainment, includingmusical & sports events, theaters, leisurefacilities and cinemas, as well as planningand agency services for fan clubs, event
planning & production (sponsorshippromotions, investment promotions) andothersOperating company

Lawson Entertainment, Inc.*1

Indonesia 42 stores

A company selling music and movie CDs& DVDs, books and related goods (throughstores & e-commerce) as well as planningand producing events and museum
exhibitions in stores*1	The number of domestic stores represents the total number of LAWSON, NATURAL LAWSON and
LAWSON STORE100 stores operated by Lawson, Inc.; LAWSON stores operated by Lawson Sanin,Inc., Lawson Okinawa, Inc., Lawson Minami-Kyushu, Inc., and Lawson Kochi, Inc.; and 3 Seijo Ishii
stores operated directly by SEIJO ISHII, CO., LTD.
	The number of overseas stores represents the total number of LAWSON brand stores managed byoperating companies in the respective regions.
*2	5 stores opened in Changsha since June 2019.
*3	3 stores opened in Shenyang since August 2019.

Operating company

Operating company

Lawson Entertainment, Inc.*1

United Cinemas Co., Ltd.

A bank employing ATMs installed in
LAWSON stores, airports, railway stations
and other locations to provide ATM services,such as cash deposits/withdrawals using
cash cards issued by financial institutions
throughout Japan. It also provides such
Lawson Bank financial services as ordinarysavings accounts, fixed deposit accounts
and credit card issuance.

A service that enables customers to pickup products ordered using a dedicated app
at a LAWSON store they designate anytime
they wish the same evening. The broad
lineup includes meal kits and fresh foods
as well as products not normally available
in LAWSON stores.

Operating company

Lawson Bank, Inc.*2*1 Name changed from Lawson HMV Entertainment, Inc. as of June 2018.
*2 Name changed from Lawson Bank Preparatory Company, Inc. as of July 2018.

49
LAWSON INTEGRATED REPORT 2019

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

Operating company

Lawson, Inc.

2019 MD&A
Management’s Discussion and Analysis

1 Eleven-Year Financial Summary
3 Industry Trends

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

4 Management Policies for Fiscal 2018

12 Consolidated Cash Flows

4 Overview of Merchandise and Services

13 Capital Policy

4 Overview of Store Operations

13 Overview of Major Consolidated Subsidiaries and Equity Method Affiliates

5 Overview of Store Development

18 Future Outlook

6 Other Initiatives in Our Convenience Store Business19 Consolidated Balance Sheet

6 Overview of Businesses in Figures

21 Consolidated Statement of Income

8 Other Businesses

22 Consolidated Statement of Comprehensive Income

9 Items of the Consolidated Statement of Income

23 Consolidated Statement of Changes in Equity

10 Items of the Consolidated Balance Sheet

25 Consolidated Statement of Cash Flows
26 Notes to Consolidated Financial StatementsEleven-Year Financial Summary(Millions of yen)

2018

(Fiscal Year)For the year:
Gross operating revenues
Franchise commissions from franchise stores
Net sales

2016

2015

2012

2011

2010

¥

275,312254,169
101,806
631,288
73,77236,40099,864（76,227）（25,638）
119,784
56,199¥261,681
227,606
94,166
583,453
72,542
31,381
112,205（68,657）（50,201）
106,747
49,293¥

247,681
174,044
76,188497,91370,482
32,687
110,568（100,434）（3,289）141,251
41,826¥

242,079
168,159
75,010485,248
68,12737,966
81,503（47,924）（39,650）
84,03247,889¥230,003
192,942
64,500487,445
66,24633,18385,189（54,196）（31,980）
77,36143,886¥

215,574
208,063
55,320478,957
61,76924,88586,357（52,912）（27,545）
74,572
37,846¥

197,673
192,330
51,275441,278
55,541
25,387
72,210（30,522）（28,799）
50,32633,084¥ 1,342,490
281,98220.6%
354,236
14,65910,395¥900,256
281,44630.6%
30,12013,992
10,028¥866,577
285,995
31.7%
67,692
13,111
9,403¥

803,212272,997
32.9%
69,793
12,395
8,377¥

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

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

579,810230,182
39.1%
72,766
11,1306,404¥

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

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

¥

¥

268
255
95.1%

¥

363
250
68.7%

¥

314
245
78.1%

¥

327
240
73.4%

¥

380
220
57.9%

¥

332
200
60.2%

¥

249
180
72.2%

¥

255
170
66.8%

Depreciation and amortization 2

302,136
288,579
109,931700,647
60,781
25,562
128,594（81,017）
277,937
140,071
66,844

255
255
99.7%
9.3%
2.3%

9.7%
3.0%

13.5%
4.4%

12.0%
4.0%

13.0%
4.7%

16.1%
6.3%

15.2%
6.0%

12.0%
4.9%

12.8%
5.5%

¥ 2,233,738
51,569¥ 2,069,609
91,075¥ 1,958,550
84,736¥ 1,880,395
79,872¥ 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

1,202,619
544,530
329,545
208,612¥ 2,285,308
2.5%

1,138,966
509,415
314,481
197,821¥ 2,160,684
2.9%

1,073,044
481,267
294,141
194,833¥ 2,043,287
3.4%

1,033,449
463,432
276,886
186,500¥ 1,960,267
3.5%

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%

Notes: 1. The U.S. dollar amounts represent Japanese yen exchange rate against the US dollar as of February 28, 2019 ($1 = ¥110.87).
2. These figures include depreciation and amortization of intangible assets.
3. These figures include sales reported by franchise stores and are unaudited.
4. Net sales for the fiscal years 2016, 2017, and 2018 represent sales by stores operated by Lawson, Inc. as well as those by Lawson Sanin, Inc.

Lawson, Inc. MD&A 20192013289,232
264,734
103,357
657,324
65,82026,828113,938（91,209）（61,238）
140,495
58,601

Other

1

2014

¥

¥

Total operating revenues
Operating income
Net income attributable to owners of parent
Net cash provided by operating activities
Net cash used in investing activities (loss)
Net cash used in financing activities
Capital expenditures
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)
Per share data:
Net income (yen/ U.S. dollars 1)
Cash dividends (yen/ U.S. dollars 1)
Payout ratio
Financial data:
Return on equity (ROE)
Return on assets (ROA)
Net sales of all stores(Domestic convenience store business ):Net sales by store format 3 4Franchise storesCompany-operated stores
Net sales by product category 3 4
		Processed foods
		Fast foods
		 Daily delivered foods
		Non-food products
Net sales of all stores
Ratio of operating income to net sales of all stores

2017

*Japanese yen figures are rounded down to the nearest million yen.
US dollar figures are rounded to the nearest thousand dollars.
(Thousands of U.S. dollars 1)(Millions of yen)

2009

¥

¥

¥

2008

185,656
233,694
47,842
467,192
50,276
12,562
40,696（42,596）（27,239）
71,39927,468¥448,132
198,13642.8%
54,843
9,761
5,236

¥

127
160
126.3%
6.5%
2.8%

¥

2018

186,928
119,944
42,604349,476
49,18623,80751,717（15,647）（14,911）42,907
20,879$ 2,725,138
2,602,868
991,539
6,319,545
548,227
230,775
1,159,872（730,748）
2,506,873
1,263,380
602,904

436,096
201,16744.8%
83,982
9,527
5,186$ 12,108,685
2,543,357

240
160
66.6%

Net sales of all stores(Domestic convenience store business)(billions of yen)
2,500

2,000

Operating income

Net income(billions of yen)
80(billions of yen)
40

70.4

1,932.7 1,960.2

2,043.2

2,160.6

72.5

73.7

2,285.3

36.4
32.6

65.8

60.7

60

31.3

30

26.8

1,500
40

20

20

10

25.5

1,000

500

0

2014

2015

2016

2017

2018

0

(Fiscal year)

0

2014

2015

2016

2017

2018

2014

2015

2016

2017

2018
(Fiscal year)(Fiscal year)

3,195,057

Total assets
$

2.30
2.30

12.5%
5.7%

(billions of yen)
300

263.7

272.9

285.9

281.4

281.9

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

(%)
20.0

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%

10,847,109
4,911,427
2,972,355
1,881,591$ 20,612,501

99.7

95.1
240

245

250

255

(%)
100

255
80

78.1
73.4

13.5

68.7

180

60

12.0

10.0

$ 20,147,361
465,130

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

(yen)
300

240

13.0

¥ 1,434,166
124,614

ROA

15.0

200

¥ 1,433,678
232,459

Dividends and payout ratio

9.7
100

9.3

120

40

60

20

5.0

4.7

4.0

4.4
3.0

0

0.0

2014

2015

2016

2017

2018

(Fiscal year)

2014

2015

2016

2017

2.3
2018

(Fiscal year)

0

2014

2015

2016

2017

2018

0

(Fiscal year)

Lawson, Inc. MD&A 20192

Financial Section

Management’s Discussion and Analysis
Industry Trends
Japanese economy enjoyed a moderate recovery in the fiscal year under review (from March
1, 2018 to February 28, 2019) thanks to the improvement in the employment and income
environments. The business environment of retail industry remains challenging due to reasons
such as fiercer competition across boundaries of business categories and influence of labor
shortages in stores and logistics.
Under these circumstances, responding to changes in dietary life due to diversified life
styles such as the progress in decreasing birthrate and aging of the population and increase ofa single-person household and female workers, country's convenience store industry expanded
the range of products that respond to customer needs in the calendar year 2018 (January to
December). Industry-wide sales amounted to 11,978.0 billion yen, up 2.0% from the previous
year. Net sales of existing stores increased by 0.6% compared to the previous year in spite ofnegative impacts by unseasonable weather caused by heavy rain mainly in West Japan in Julyand the reaction to the tobacco tax increase in October. The total number of stores as of theend of December 2018 stood at 56,574, about the same level with the previous year.

■ The net sales of all stores among the top 3 chains in the convenience store industry 1■ Retail industry market size and convenience store share 1

Number of convenience
stores

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

Lawson

2,424

2,283

2,157

2,049

1,961

1,945

1,907

1,826

1,683

1,666

1,559

Seven-Eleven Japan

4,899

4,678

4,515

4,291

4,008

3,781

3,508

3,281

2,948

2,785

2,763

2,006

1,860

1,722

1,585

1,535

1,440

1,274

1,246

975

944

951

947

980

923

902

940

(Fiscal year)

FamilyMart

※2
2,983

3,016

3,009

Total of the top 3 chains

10,306

9,977

9,682

9,321

8,773

8,399

7,947

7,622

6,994

6,627

6,508

Total market share of the
top 3 chains

86.0%

84.9%

84.6%

84.8%

84.2%

85.1%

83.9%

86.9%

86.2%

83.0%

81.9%

Circle K Sunkus

Source: Data published by each company
Note: 1. The figures for the top three chains are on a fiscal-year basis, while the total market share of the top three chains is the proportion inconvenience store sector annual sales on a calendar-year basis.
2. On September 1, 2016, all Circle K Sunkus stores have been renamed to FamilyMart as the result of the merger of FamilyMart Co.
and Uny Group Holdings Co.

■ Number of convenience stores(Calendar year)(Calendar year)
Total retail industry annual
sales
Convenience store sector
annual sales
Convenience store share

2018

2017

2016

2015

2014

(Billions of yen)

2013

2012

2011

2010

2009

2008

(Stores)

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

56,57456,37455,63654,50552,72550,23447,801

43,37342,347

41,72440,745

Source: “Current Survey of Commerce,” Ministry of Economy, Trade and Industry

144,965 142,514 139,877 140,666 141,219 138,897 137,585 135,157 136,479 132,961 136,019
11,978
8.3%

11,745
8.2%

11,445
8.1%

10,995
7.8%

10,423
7.3%

9,872
7.1%

9,477
6.9%

8,775
6.5%

8,114
5.9%

7,981
6.0%

7,943

■ Non-consolidated operating results

5.8%

As a percentage
of all storesSource: “Current Survey of Commerce,” Ministry of Economy, Trade and Industry
Notes: 1. The figures in the table reflect the revision of the figures in 2004 and onwards that the Ministry of Economy, Trade and Industry
compiled in March 2013.
2. The figures above reflect the revision of the figures in 2004 and onwards that the Ministry of Economy, Trade and Industry compiledin March 2013.

(Fiscal year)
Net sales of all stores

Lawson, Inc. MD&A 20192018
2,236,125(Millions of yen)

2017

2016

2015

2014

100.0% 2,110,454 100.0% 2,027,504 100.0% 1,960,267 100.0% 1,932,798 100.0%

Gross operating
revenues

385,67817.2%

372,89117.6%

356,18617.5%

333,85617.0%

316,340

16.4%

Gross operating profit

348,491

15.6%

335,792

15.9%

325,71616.0%

308,88915.7%

293,93815.2%

302,779

13.5%

284,771

13.5%

268,29613.2%

251,64212.8%

232,972

12.1%

Selling, general andadministrative expenses
Advertising andpromotional expenses

3(Billions of yen)

13,363

0.6%

12,5460.6%

13,8080.6%

14,705

0.7%

8,227

0.4%

Personnel expenses

45,9032.0%

44,722

2.1%

41,5272.0%

39,2482.0%

36,691

1.9%

Facility expenses

172,5747.7%

160,243

7.6%

150,182

7.4%

142,073

7.2%

132,941

6.9%

Other SG&A
expenses

70,9393.1%

67,2603.2%

62,7793.1%

55,616

2.8%

55,112

2.9%

Operating income

45,711

2.0%

51,021

2.4%

57,4192.8%

57,2472.9%

60,966

3.2%

Ordinary income

51,4432.3%

50,5082.4%

56,4592.7%

54,9832.8%

61,6493.2%

Net income

31,002

1.4%

19,4170.9%

19,0880.9%

21,802

1.1%

26,2001.4%

Management Policies for Fiscal 2018

In the over-the-counter fast food category, we strengthened our assortment ofdelicatessen items offered in evenings and at night by expanding our lineup of packed dishes

For the year ended February 28, 2019, we have advanced and accelerated our 1000Day Action Plan, which is in its final fiscal year, and focused our business activities
while building Next-Generation LAWSON Convenience Store model. Changes incommunity needs resulting from factors such as an aging population and the prevalenceof the nuclear family are serving as a tailwind for the convenience store industry. On theother hand, there is always a need to cope with such changes promptly due to fiercer
competition across boundaries of business categories, among other factors. Given sucha business environment, we implemented a variety of measures in order to continue tobe an essential part of our communities that can satisfy customers everyday needs.
Such measures included evolving our business model as manufacturing retailer basedon small commercial areas, raising our store productivity by making maximum use ofdigital technology, and taking on a new challenge of launching a banking business.
Specifically, we offered everyday familiar dishes including boxed meals, riceballs, deep fried food, delicatessen items, salads and soups at LAWSON stores. In
our effort to reinforce our store capacity by expanding our merchandise assortment
offered especially in evenings and at night we restructured our system across the entire
supply chain from June 2018 by changing the order placement deadline and truck
delivery times. Also, as one of countermeasures against labor shortages, with the aimof simplifying cash register operations and achieving higher cash-handling efficiency
at stores, we completed the introduction of new POS (point-of-sale) cash registers
equipped with an automatic change dispenser function at all our stores nationwide.

Overview of Merchandise and Services
On the merchandise side, we renewed rice balls, convenience store staples, by improving
ingredients and production methods including adopting a new variety of rice and a new kindof laver, which was well-received by customers. In addition, our “Akuma-no-onigiri” (=toodelicious to stop eating) also became a huge hit, pushing up sales. Our “Korega” boxed mealseries made with rigorously selected ingredients and production methods also enjoyed ongoing
popularity. Furthermore, microwavable hot noodle series renewed with new soup and noodles

composed mainly of items that can go straight to the dinner table. Also, sales of our long seller
product “Karaage-kun” chicken nuggets whose cumulative unit sales exceeded 3 billion since
its launch in April 1986 continued to be robust.
In the dessert category, we continued offering the “Uchi Café SWEETS X GODIVA” series
produced in collaboration with Godiva with well-selected ingredients and a special production
method, which remained popular especially among female customers.
On our sales promotion side, while strengthening our merchandise assortment offeredin evenings and at night, we rolled out a special evening sales campaign “Yugata Tokuichi”
which offered a 20-yen discount when two applicable counter food items were purchasedon weekday evenings. In addition, effective measures to attract customers were launched,including a speed lottery capitalizing on our strength in the entertainment field.

Overview of Store Operations
In store operations, we continued to focus on reinforcing adherence to the Three Essential
Practices, which emphasizes (1) serving customers courteously; (2) providing a quality productoffering that meets community needs; and (3) keeping our stores and communities clean. We
also actively promoted improvement of franchise support system and store operations.
In November 2018, we started a service in which customers can earn and redeem Ponta
points when they use Apple Pay at any LAWSON store nationwide. Ponta has become Japan’s
first multi-partner loyalty card service to allow points to be saved and redeemed simply byusing Apple Pay via iPhone or Apple Watch. This service eliminates the need for customers
to present their Ponta card or launch their app as well as the need for store staff to scan thebarcodes on the Ponta cards presented, leading to improved customer convenience and store
operation productivity. Furthermore, we launched a pilot project on “Lawson Smartphone CashRegister,” our mobile self-service payment service option based on a dedicated app, whichallows customers to purchase items wherever they are within LAWSON stores.

were also sold well.

Lawson, Inc. MD&A 20194

Overview of Store Development
In developing (opening) new stores, the Group continued to prioritize profitability.
The total number of “LAWSON,” “NATURAL LAWSON” and “LAWSON STORE100” stores opened
and closed in Japan during the fiscal year under review stood at 1,067 and 400 stores respectively, withthe total number of stores in the country reaching 14,659 as of the end of February 2019.*
Of the stores above, in partnerships with other convenience store chain operators, underbusiness integration or other contracts with them, we converted “THREE F” and other storesoperated by Three F Co., Ltd. into the “LAWSON THREE F” brand and “SAVE ON” stores operated
by Save On Corp. into the “LAWSON” brand, respectively. We converted 67 stores into “LAWSON
THREE F” stores and 195 “Save On” stores into LAWSON stores during the fiscal year under review
and we have completed all brand conversion.
In an effort to establish convenience store models catered to an aging population and rising
health consciousness, through partnerships with prescription drug pharmacy and drug store
chains we continue to expand healthcare-focused LAWSON stores that offer over-the-counter
pharmaceuticals and prescription drugs, as well as a wider assortment of cosmetics and daily
necessities than ordinary LAWSON stores. The number of LAWSON stores offering over-thecounter pharmaceuticals, including such healthcare-focused stores, reached 206 as of the end of
February 2019 (of which 47 stores were Pharmacy LAWSON stores equipped with drug-dispensing
pharmacies). The number of LAWSON stores with a nursing care consultation counter reached 20
as of the end of February 2019. Furthermore, we have also been expanding our chain of “in-hospital
LAWSON stores,” which features strengthened focus on medical, sanitary, nursing and rehabilitation
supplies in addition to merchandise and services offered at standard convenience stores. The numberof such stores has reached 307 as of the end of February 2019. Building on our expertise developed
through operation of in-hospital LAWSON stores, we will continue to support the lives of all peopleinteracting with hospitals.
As for LAWSON STORE100, we will continue to meet wide-ranging customer needs by offeringa product assortment of adequate-volume and small-lot products priced at 100 yen excluding tax.

■ Number of convenience stores in Japan* The numbers of openings and closings and the total number of stores in Japan include the number of stores operated by Lawson,
Inc., stores run by our subsidiary Lawson Sanin, Inc., and stores operated by Lawson Kochi, Inc., Lawson Minami-Kyushu, Inc., andLawson Okinawa, Inc. which are equity-method affiliates.

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

2018

2017

2016

2015

2014

Total number of stores

14,65913,992

13,111

12,395

12,276

Openings

1,067

1,250

1,143

1,007

1,010

Closings

400

369

427

888

422

Net increase

667

881

716

119

588

(Fiscal year)

Note:	Including the number of stores operated by Ninety-nine Plus, Inc., Lawson Mart, Inc., Lawson Sanin, Inc., Lawson Kochi, Inc., Lawson
Kumamoto, Inc., Lawson Minami-Kyushu, Inc., and Lawson Okinawa, Inc5

Lawson, Inc. MD&A 2019

Net increasein the term

2017

(Fiscal year)

StoresShare

2016
StoresStores2015
Share

StoresShare

Lawson, Inc.
Company-operated stores
LAWSON

303

2.1%

19

284

2.0%

248

1.9%

NATURAL LAWSON

24

0.2%

-4

28

0.2%

30

0.2%

Type B

1,839

12.5%

223

1,616

11.5%

1,306

10.0%

Type G

1,466

10.0%

-116

1,582

11.3%

1,680

12.8%

Type CFranchise stores

9,244

63.1%

529

8,715

62.3%

8,115

61.9%

NATURAL LAWSON

115

0.8%

ー

115

0.8%

111

0.8%

LAWSON STORE100 1

806

5.5%

1

805

5.8%

798

6.1%

13,79794.1%

652

13,14593.9%

12,288

93.7%

Subtotal
Lawson Sanin, Inc. 2
Company-operated storesFranchise stores
Subtotal

5

0.0%

ー

5

0.0%

5

0.0%

287

2.0%

2

285

2.0%

282

2.2%

292

2.0%

2

290

2.1%

287

2.2%

Lawson Kochi, Inc. 3
Company-operated storesFranchise stores
Subtotal

6

0.0%

3

3

0.0%

5

0.0%

134

0.9%

-2

136

1.0%

130

1.0%

140

1.0%

1

139

1.0%

135

1.0%

Lawson Minami-Kyushu, Inc.
Company-operated storesFranchise stores
Subtotal

3

0.0%

1

2

0.0%

1

0.0%

194

1.3%

2

192

1.4%

190

1.4%

197

1.3%

3

194

1.4%

191

1.5%

0.0%

Lawson Okinawa, Inc.
Company-operated stores

Subtotal
Total number of convenience stores

4

0.0%

1

3

3

0.0%

229

1.6%

8

221

207

1.6%

233

1.6%

9

224

210

1.6%

14,659100.0%

667

13,992

13,111100.0%

100.0%

Notes: 1. The number of stores of LAWSON STORE 100 includes that of LAWSON STORE 100 and Lawson Mart.
2. In November 2016, Lawson, Inc. transferred 234 stores to Lawson Sanin, Inc.
3. In April 2015, Lawson, Inc. transferred 128 stores to Lawson Kochi, Inc.

Financial Section

Other Initiatives in Our Convenience Store Businesssales of all stores and existing stores exceeded the previous year results are as follows.

As Lawson’s “last-one-mile solution,” we started offering the “LAWSON FRESH PICK” service(“Loppick”) in March 2018. Loppick enables customers to reserve products on a dedicatedsmartphone app by 8 a.m. and receive them in the evening on the same day at their designated
LAWSON store. By leveraging our existing store and logistics network, the service offers
customers the freedom of not having to wait at home for delivery and allows them to pick up
their purchased items when they want in the evening. Loppick has become available at around
1,600 stores as of the end of February 2019. Furthermore, in December 2018, we launched“Fresh Karaage-kun Cooking Machine,” a pilot experiment, which employs digital technology
to deep-fry chicken nuggets in one fifth of the usually required time in order to offer freshly
fried products to customers. We will look into customers’ needs for freshly fried products andconsider introducing this equipment at LAWSON stores in the future.

throughout the year and a huge hit of “Akuma-no-onigiri” contributed to the sales, among otheritems. As for sales of prepared noodle dishes, microwavable hot noodles such as renewed“Konshinno Ippai” series with new soup and noodles were selling well and increased sales.
In the daily delivered food category, sales of frozen foods and daily delivered foods which
we continue strengthening by expanding the assortment of items remained strong. Sales of ice
cream grew from the previous fiscal year due to popular “Uchi Café SWEETS” series, among
other factors.
In the processed food category, sales of cigarette products grew from the previous fiscal
year partially because of price increase after tax increase in October 2018.

In the fast food category, among rice dishes, rice balls of “Onigiriya” were popular■ YoY changes in net sales of existing stores, average number of customers and average spending

per customer *Overview of Businesses in Figures
Net Sales
Net sales of all LAWSON stores (consolidated) for the year ended February 28, 2019 amounted
to 2,424,500 million yen (up 6.2% from the previous fiscal year). This year-on-year sales growth
was achieved as the number of LAWSON stores in Japan increased to 14,659 (including thestores of all Group companies and those of the Seijo Ishii business), an increase of 667 storescompared to the previous fiscal year, among other factors.
Sales of existing stores for fiscal 2018 (non-consolidated basis) decreased by 0.5% fromthe previous fiscal year and did not reach the plan. As a result of reinforced promotions onpurchases in evenings and at night, we could harness new demands from homemakers andsenior citizens. Also, we could increase the sales of expanded assortment of merchandise
items such as rice balls and boxed meals in evenings and at night as a result of restructuring
supply chain. We could not recover the number of customers due to fiercer competition withother chain stores, restaurants and drugstores, among other factors. On the other hand,average spending per customer increased from the previous fiscal year by 1.8% compared tothe previous fiscal year as a result of our efforts to expand the assortment of merchandise inevenings and at night such as rice balls and boxed meals, renewal of microwavable hot noodle
series with new soup and noodles and dessert menus such as “Premium Roll Cake,” our staple

（%）
110
105
100

99.4 99.1 99.7 99.8

95
90
0

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
2013

2014

Net sales of existing stores

2015

2016

Average number of customers

2017

2018

Average spending per customer■ Growth rate of net sales of existing stores, average number of customers, and average spending

per customer *
2018

2017

2016

2015

2014

Net sales of existing stores (YoY)

99.5%

99.9%

99.8%

101.4%

99.0%

Average number of customers

97.7%

98.7%

99.0%

100.9%

98.0%

Average spending per customer

101.8%

101.3%

100.8%

100.4%

101.0%(Fiscal year)* The total of LAWSON and NATURAL LAWSON.

product.
Regarding consolidated results by product category, the main categories of which both net

Lawson, Inc. MD&A 20196

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

2018

2017

520.4 24.7%

Fast foods (share)

2016484.9 24.5%

2015

464.8 24.5%

450.5 24.7%(Billions of yen)

■ Types of Lawson contracts

2014(Previous contracts)

412.2 23.5%

Contract type

C

G

B

283.9 13.5%

268.0 13.5%

251.4 13.3%

235.6 12.9%

227.4 12.9%

Contract term

Processed foods (share)

1,107.3 52.6%

1,043.0 52.7%

995.3 52.6%

960.8 52.8%

941.5 53.6%

Requirements for FC owners(Cigarettes) (share)

532.9 25.3%

498.6 25.2%

471.9 24.9%

460.0 25.3%

462.8 26.3%

Land and buildings

Provided by headquarters

Prepared by a franchise store

194.2

182.9

182.1

174.0

9.6%

175.9 10.0%

Borne by headquarters

Borne by a franchise store

1,821.1 100.0%

1,757.2 100.0%

Investment in store construction andinterior decoration expenses

Daily delivered foods (share)

Non-food products (share)
Net sales of all stores (share)

9.2%

2,105.9 100.0%

9.3%

1,979.0 100.0%

9.6%

1,893.7 100.0%* The total of LAWSON and NATURAL LAWSON.

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

Signs and business fixtures
Payment by a franchise
store at time of contract 1■ Product categories

10 years from store opening day

Provided by headquarters
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

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.

Headquarters income 2

The gross profit margin stood at 31.2%, down 0.1% from the previous fiscal year anddown 0.2% compared to the plan. This was mainly attributable to decreased grossprofit margin of processed foods and the fact that sales of cigarette products with alower gross profit margin exceeded the plan which deteriorated product mix.

Requirements for FC owners

2018

2017

2016

2015

2014

Fast foods

38.2%

38.3%

38.4%

38.4%

38.9%

Daily delivered foods

34.0%

33.9%

34.0%

34.0%

34.1%

Processed foods

23.9%

24.0%

24.1%

24.0%

24.1%

Non-food products

50.3%

50.1%

49.1%

49.7%

48.9%

Gross profit margin

31.2%

31.3%

31.4%

31.3%

31.3%

■ Third party bill settlement services (Non-consolidated) *
2016

2015

2014

2,412,349

2,263,937

2,132,450

2,088,693

Number of transactions (millions)

215.2

208.6

202.0

198.3

198.9

Commission revenues (millions of yen)

11,466

11,154

10,788

10,671

10,779Bill settlements (millions of yen)

* The total of LAWSON and NATURAL LAWSON.

7

Lawson, Inc. MD&A 2019

21,00022,20022,200Cn

2,073,049Bn

10 years from store opening day
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 andinterior decoration expenses

Borne by headquarters

Borne by a franchise store

Signs and business fixtures
Payment by a franchise
store at time of contract 1■ Gross profit margin by product category (Non-consolidated) *2017

Gross profit x 34%(New contracts)

Gross profit margin by product category*

2018

Not required

Gross profit x 45%
A franchise store

Minimum guarantee (annual) 2 (thousands of yen)Contract term

(Fiscal year)

Average monthly sales x 2 months

Burden of utility expenses

Contract type

(Fiscal year)

Not required
Gross profit x 50%

Provided by headquarters
Franchise ¥1.0 million (Training expenses, and store opening preparation commission, each ¥500,000)
fee(excluding tax)

Headquarters will bear the following percentage of clearance and disposal costs according to their
proportion in merchandise sales:
Partial guarantee for expenses• Greater than 2.0% up to 3.0%: 20%
associated with product disposal losses• Greater than 3.0% up to 4.0%: 30%• Greater than 4.0%: 55%[Charge] 4, 5Multiply by one of the following
charge rates according to gross profit¥3.0 million or less: 41%¥4.5 million or less: 36%¥6.0 million or less: 31%
Greater than ¥6.0 million: 21%

Headquarters income 2

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%

Burden of utility expenses

50% 3 of electricity expenses and store air conditioning energy expenses are borne by headquarters

Minimum guarantee (annual) 2¥18.6 million¥19.8 million

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.
4. Gross profit on a monthly basis
5. Add 3% uniformly for non-24-hour storesFinancial Section

Other Businesses■ Types LAWSON STORE100 contracts
Contract typeLand and buildings
Contract stores
Contract term
Necessary
expenses

VL-B
A franchise store uses its own
land and building

New opening stores or stores already being operated by thecompany

Land and building owned by afranchise store

10 years from store opening day
Franchise fee ¥1.0 million (excluding tax)
Payment by afranchise store at time Breakdown	Contract fee ¥250,000/Training expenses ¥250,000/Store opening preparation
6
commission ¥500,000
of contract
Other expenses

Investment

VL-J
Provided by headquarters

Store construction
and interior decoration
expenses
Business fixtures

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

Borne by a franchise store

Provided by headquarters

Minimum guarantee 7¥20.4 million per year

¥22.2 million per year

Headquarters income 7[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%

Gross profit x 27%

Support to franchise stores (Operating
expenses of a franchise store partiallyborne by headquarters)

Headquarters will bear the following percentage of clearance anddisposal 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.

̶Notes: 6.	The amount is paid by the franchise store to headquarters at the time of the franchising contract.
7. The minimum guarantee and headquarters income apply to stores operating on a 24-hour basis.

Regarding the Seijo Ishii business, high-end supermarkets “Seijo Ishii” offering quality foods, we took on
new challenges such as opening stores where freshly prepared hot meals and desserts are served toorder by food carts. The number of company-operated stores reached 146 as of the end of February
2019 including the new type of stores. Sales were solid and its well-selected products have remained
popular among customers.
With regard to entertainment-related business, the ticketing business of Lawson Entertainment,
Inc. which forms the core of the business, continued to secure the top-class transaction value in theticketing industry. The number of HMV stores which sell music CDs, DVDs and books totaled 56 as ofthe end of February 2019. This figure included the “HMV Record Shop” specializing in analog records.
In November 2018, United Cinemas Co., Ltd., an operator of cinema complexes, introduced a cuttingedge attraction theater system known as “4DX®,” which offers an immersive viewing experience inFukuoka Prefecture. In addition, United Cinemas also opened Kyushu’s first cinema theater employing
ScreenX, which provides a three-dimensional movie projection system (front + walls on right and left).
United Cinemas operates cinema a total of 41 sites and 367 screens at the cinema nationwide (including
screens operated on commission) as of the end of February 2019.
With regard to Financial services business, Lawson Bank, Inc. acquired its banking license on
August 10, 2018 and started providing banking services to customers on October 15. Aiming at building
awareness of the bank, we have been running TV and online commercials, implementing promotional
campaigns in which ATM (automatic teller machine) users receive discount coupons for “Karaagekun,” “MACHI Café” and “Uchi Café SWEETS,” and started offering ordinary savings account and fixeddeposit account services. In addition, we issued the “LAWSON Ponta Plus” credit card, which allows
cardholders to earn Ponta points when using their credit cards at LAWSON stores and other outlets.
In our ATM business, the foundation of our banking business, we expanded our network of financial
institution partners, while working to install ATMs at locations other than LAWSON stores, including
New Chitose Airport and Tokyo Metro stations. As of the end of February 2019, the number of ATMs
installed nationwide reached 13,459 (up 726 from previous fiscal year), with each ATM used 48.9 times
a day on average. The total number of our financial institution partners increased to 111 nationwide (up21 from previous fiscal year), including online banks. *1 *2
With respect to Overseas business, the Group’s operating companies opened LAWSON stores in
the People’s Republic of China, Thailand, Indonesia, The Philippines, and State of Hawaii of the UnitedStates of America. In the People’s Republic of China, after being the first Japanese convenience store
operator to advance into Shanghai, we made inroads into Chongqing, Dalian, Beijing, Wuhan andNanjing. The number of LAWSON stores in the entire country reached 2,007 as of the end of February
2019.
*1 JA Bank and JF Marine Bank are classified as separate financial institutions by business category.
*2 Lawson Bank Preparatory Company, Inc. changed its name to Lawson Bank, Inc., effective July 2, 2018.

Lawson, Inc. MD&A 20198

Items of the Consolidated Statement of Income
Gross Operating Revenues
For the year ended February 28, 2019, gross operating revenues consisting of net sales,
franchise commissions from franchise stores, and Other stood at 700.6 billion yen, an increaseof 43.3 billion yen from previous fiscal year. Of these items, Other operating revenue was 109.9
billion yen, an increase of 6.5 billion yen from previous fiscal year. This was attributable to thefact that franchise commissions from franchise stores increased due to the increased numberof convenience stores in Japan.
Selling, General, and Administrative Expenses (consolidated and non-consolidated)
Consolidated selling, general, and administrative expenses stood at 441.8 billion yen, an
increase of 31.6 billion yen compared to the year-ago period. This increase was mainly
attributable to the increase of selling, general, and administrative expenses on a nonconsolidated basis due to the increased number of stores and recording of opening expensesof Lawson Bank for subsidiaries and associates, among other factors. On the other hand, nonconsolidated selling, general, and administrative expenses amounted to 302.7 billion yen, an
increase of 18.0 billion yen, compared to the year-ago period.
Non-consolidated Rent amounted to 113.1 billion yen, an increase of 6.1 billion yen due tothe increased number of stores.
Non-consolidated advertising and promotional expenses increased by 0.8 billion yen fromthe previous fiscal year to 13.3 billion yen, due mainly to promotional activities for reinforced
promotions on purchases in evenings and at night.
Non-consolidated sales commission consists mostly of the costs associated with foodwaste and electricity expenses. These costs and expenses are paid by headquarters based on
franchise contracts. Non-consolidated sales commission was 22.3 billion yen, an increase of
2.6 billion yen compared to the year-ago period. This was mainly attributable to the fact that the
number of stores increased, the Company supported franchise stores for food waste expenses
through reinforced promotions on purchases in evenings and at night and electricity expenses
increased.
Non-consolidated information technology (IT) costs stood at 8.7 billion yen, an increase of
1.5 billion yen compared to the year-ago period mainly due to recording development cost of
next-generation systems, and 2.4 billion yen short of the plan, which was attributable to the factthat the costs expected for development of next-generation systems decreased and review ofmodification costs further reduced the costs required for existing systems.
With regard to items whose differences between non-consolidated and consolidated

9

Lawson, Inc. MD&A 2019

■ Breakdown of Selling, General, and Administrative expenses (Consolidated)(Fiscal Year)
Personnel expenses
Percentage composition
Advertising and promotional expenses(Millions of Yen)

2018

2017

2016

2015

2014

84,27979,13573,893

68,99460,847

19.1%

19.3%

19.2%

19.4%

20.3%

28,25426,00130,59429,461

16,718

6.4%

6.3%

7.9%

8.3%

5.6%

132,739

124,387

115,926

108,795

96,877

30.0%

30.3%

30.2%

30.6%

32.3%

2,826

2,796

2,149

2,763

3,579

Percentage composition

0.6%

0.7%

0.5%

0.8%

1.2%

Depreciation and amortization

66,73558,49955,51649,157

41,788Percentage composition

15.1%

14.3%

14.5%

13.8%

14.0%

53,27647,59544,65240,27032,959Percentage composition
Rent
Percentage composition
Equipment lease	Depreciation of property and store
equipment
Percentage composition

12.0%

11.6%

11.6%

11.3%

11.0%

Amortization of intangible assets

13,45910,903

10,864

8,886

8,830

3.0%

2.7%

2.8%

2.5%

3.0%

126,992

119,311105,182

95,791

79,506				Percentage composition

Other
Percentage composition
Total
Percentage composition

28.7%

29.1%

27.4%

27.0%

26.6%

441,825

410,129

383,260

354,961

299,315100.0%

100.0%

100.0%

100.0%

100.0%

selling, general, and administrative expenses were large, personnel expenses increased fromprevious fiscal year mainly due to an increase from newly joined consolidated subsidiary fromthe fiscal year under review. Advertising and promotional expenses increased mainly due toan increase of sales promotional expenses for Entertainment business and Financial services
business. Sales commission increased mainly due to an increase of bank ATMs installed instores in accordance with the increase of the number of stores.
Operating Income
Operating income for fiscal 2018 stood at 60.8 billion yen, down 5.0 billion yen comparedto the year ago period and up 0.7 billion yen compared to the plan. In this fiscal year underreview, we plan to reduce operating income by approximately 6.0 billion yen (-5.0 billion yen
for development of next-generation systems to improve store operation efficiency to achievesustainable growth, -2.0 billion yen Lawson Bank related cost of new business, +1.0 billion

Financial Section

Items of the Consolidated Balance Sheetyen for convenience store business Other). The results are, Lawson Bank related cost andconvenience store business Other were almost as planned, while approximately 1.0 billion
yen cost could be reduced for development of next-generation systems, which enabled us toachieve the plan.
Although income decreased for consolidated subsidiaries mainly due to recording of
opening expenses of Lawson Bank for the Financial services business, significant improvementof overseas business, steadily increasing Seijo Ishii business and Entertainment business
contributed to income to offset decreased income.
Ordinary income
Ordinary income for the year under review stood at 57.7 billion yen, a decrease of 7.4 billion
yen compared to the year-ago period while up 0.7 billion yen compared to the plan, which
was attributable to increased non-operating expenses due to increased interest paid for new
business of banking business and recording of disaster related expenses.
Net income attributable to owners of the parent for the year under review
Although there was a positive impact due to reaction of IT systems impairment in the previous
fiscal year, because impairment loss related to stores increased more than expected, net
income attributable to owners of the parent for the year under review stood at 25.5 billion yen,a decrease of 1.2 billion yen compared to the year-ago period and 2.4 billion yen short of theplan.

●Consolidated Balance Sheet
Current Assets
Current assets increased by 392.1 billion yen from the end of the previous fiscal year to 623.9
billion yen, mainly reflecting an increase of 324.1 billion yen in cash and deposits.
Non-current assets
Non-current assets increased by 50.0 billion yen from the end of the previous fiscal year
to 718.4 billion yen, mainly reflecting an increase of 32.3 billion yen in property and store
equipment and an increase of 11.2 billion yen in investments and other assets such as leasedeposits. As a result, total assets increased by 442.2 billion yen from the end of the previous
fiscal year to 1,342.4 billion yen.
Current Liabilities
Current liabilities increased by 219.3 billion yen to 598.5 billion yen, mainly reflecting an increaseof 90.2 billion yen in short-term loans payable and an increase of 49.4 billion yen in current
portion of long-term loans payable.

Long-term Liabilities
Non-current liabilities increased by 222.3 billion yen from the end of the previous fiscal year to461.9 billion yen, mainly reflecting an increase of 204.5 billion yen in long-term loans payable.
As a result, total liabilities increased by 441.6 billion yen from the end of the previous fiscal year
to 1,060.5 billion yen
Long-term and short-term loans included 330 billion yen loans of Financial service
business.
Net Assets
Net assets increased by 0.5 billion yen from the end of the previous fiscal year to 281.9 billion
yen, mainly reflecting an increase of 1.2 billion yen in valuation difference on available-for-salesecurities and a decrease of 0.6 billion yen in foreign currency translation adjustment. As aresult, shareholders’ equity ratio was 20.6% (30.6% as of the end of the previous fiscal year).

Lawson, Inc. MD&A 201910

Items of the Consolidated Balance Sheet●Accounts Specific to the Company s Consolidated Balance Sheet
Shown below are accounts that are specific to the Company’s balance sheet.

Accounts Receivable-Due from Franchise Stores
Merchandise ordered by individual franchise stores are procured by the Company ina centralized manner, which in turn calculates the amount of payments to individual
suppliers on behalf of franchise stores before performing proxy payment service forthem. This is followed by the franchise headquarters collecting the payment amountfrom each franchise store as accounts receivable-due from franchise stores, which
essentially constitutes their obligation to the franchise headquarters.
As of February 28, 2019, accounts receivable-due from franchise stores stood at
47.1 billion yen, an increase of 500 million yen compared to the end of the previous
fiscal year.
Accounts Receivable-Other
Accounts receivable-other include accounts receivable from business partners,
such as certain accounts receivable from franchise stores (franchise store credit cardbased sales proceeds). Accounts payable are composed of accounts payable-trade,an account for directly operated stores, and accounts 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 party to agreements with credit card companies, Lawson, Inc.
is the holder of all accounts receivable from them.
As of February 28, 2019, accounts receivable-other amounted to 124.0 billion
yen, an increase of 39.3 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 waspreviously recorded in lease deposits, yet it is currently recorded in long-term loans
receivable. Long-term loans receivable as of February 28, 2019 stood at 44.0 billion
yen, a decrease of 3.4 billion yen compared to the end of the previous fiscal year.

11

Lawson, Inc. MD&A 2019

Lease Deposits
When entering into a lease agreement with the landlord, the Company deposits
with the former a security deposit worth several monthsʼ rent for the property. Leasedeposits as of February 28, 2019 totaled 107.0 billion yen, an increase of 6.3 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 the headquartersʼ obligation tofranchise stores. All franchise storesʼ daily sales proceeds are sent to the headquarters,
and exceed, on occasion, accounts receivable-due from franchise stores. In such
event, the Company records the amount in accounts payable-due to franchise storeson the consolidated balance sheet, as part of outstanding liabilities. Accounts payabledue to franchise stores as of February 28, 2019 totaled 1.6 billion yen, a decrease of
900 million yen compared to the end of the previous fiscal year.
Deposits Received
Deposits received consist mainly of utilities payment services deposits and concerts
ticket price deposits. The total of handling amount of utilities payment services
continued to increase and stood at 2,412.3 billion yen, an increase of 6.6% supportedby the increase of the number of cases handled and companies covered by theservices. As of February 28, 2019, deposits received amounted to 131.8 billion yen, an
increase of 22.1 billion yen compared to the end of the previous fiscal year.

Financial Section

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

Consolidated Cash Flows

Total consolidated capital expenditures for the year ended February 28, 2019 stood at 140.0
billion yen, a decrease of 400 million yen compared to a year-ago period.
Investments in new stores amounted to 42.0 billion yen, a decrease of 13.7 billion yen
compared to a year-ago period reflecting reverse effect of payment for conversion from
THREE F which was recorded in the previous fiscal year. Investments in existing stores totaled
11.4 billion yen, an increase of 4.0 billion yen compared to a year-ago period. Main driver ofthis increase was promotion of hardware improvement measures for existing stores such as
switching to LED lighting with higher energy saving effect to improve the profitability of franchise
stores. Lease transactions stood at 5.9 billion yen, an increase of 10.1 billion yen compared toa year-ago period mainly due to introduction of POS cash registers equipped with an automaticchange dispenser function.
Shown below is the breakdown of the main capital expenditures.

Net cash provided by operating activities for the year ended February 28, 2019 stood at a cash
inflow of 128.5 billion yen, a cash increase of 14.6 billion yen compared to a year-ago period,
due mainly to changes in accounts payable-other, accounts receivable and deposits received.
Net cash used in investing activities for the year ended February 28, 2019 amounted to acash outflow of 81.0 billion yen, a cash decrease of 10.1 billion yen compared to a year- agoperiod, which was due, among others, to decrease in payments for transfer of business and anincrease of proceeds from sales of investment securities.
Net cash used in financing activities for the year ended February 28, 2019 amounted toa cash inflow of 277.9 billion yen, a cash increase of 339.1 billion yen compared to a year-ago
period, which was due, among other reasons, to an increase in proceeds from long-term loans
payable and net increase in short-term loans payable.
As a result, cash and cash equivalents as of February 28, 2019, stood at 354.2 billion yen,
an increase of 324.1 billion yen compared to February 28, 2018.

■ Capital Expenditures(Millions of Yen)

2018

2017

2016

2015

2014

New store investments

42,08255,86347,594

40,46049,014

Existing store investments

11,425

7,403

7,233

6,727

5,840

IT-related investments

18,195

18,615

19,261

15,882

8,218

Other investments

7,295

5,401

1,464

1,466

2,752

Sub-total investments

78,99887,28375,55464,53565,82342,610(Fiscal Year)

Investments and advances

2,019

4,358

1,594

4,122

Leases*59,05348,854

42,63438,08932,818Total

140,071

140,495

119,784

106,747

141,251* Leases are shown in an amount equivalent to the acquisition costs for the lease assets acquired during each accounting period.
The amount of repayments of lease obligations (consolidated) is 32,096 million yen in fiscal year 2017 and 40,682 million yen in
fiscal year 2018.

■ Breakdown of depreciation and amortization(Millions of Yen)

2018

2017

2016

2015

2014

Depreciation of property andstore equipment

53,38447,69744,79240,39632,977

Amortization of intangible assets

13,45910,903

11,406

8,897

8,849

Total depreciation andamortization

66,84458,601

56,19949,293

41,826(Fiscal Year)

Lawson, Inc. MD&A 201912

Capital Policy

Overview of Major Consolidated Subsidiaries and Equity Method Affiliates

There is no change to the annual dividend for the year ended February 28, 2019, from 255 yen
per share announced at the beginning of the fiscal year. We changed dividend policy for theyear ending February 29, 2020.
To return profits to shareholders is deemed by the Company to be a key management goal
and we continued stable dividend payments every fiscal year. However, as a policy to provide
appropriate distribution of profit in accordance with our performance while maintaining financial
health, we introduced “consolidated dividend payout ratio” to clearly demonstrate our intention
for profit sharing with shareholders. Although our shareholders-oriented management will notchange, we will establish a basic policy; while continuing our efforts to support franchise storesand investment to improve profit of franchise stores, we will provide our shareholders with asmuch dividends as possible within the range of dividend payout ratio and we decided to “paydividends at a consolidated dividend payout ratio target of 50%, with a minimum of 150 yen per
share as the lower limit.” As a result, we plan to pay 150 yen per-share dividend for fiscal year
ending February 29, 2020.

Consolidated financial results for the year ended February 28, 2019 include thefinancial results of 24 group companies comprising 21 consolidated subsidiaries
and three equity method affiliates. The principal business activities of Lawson, Inc.
s subsidiaries and affiliates consist of the domestic convenience store business,
Seijo Ishii business, entertainment business, financial service business, and overseas
business. The following paragraphs outline the business activities and financial resultsof Lawson, Inc.ʼ s major consolidated subsidiaries and affiliates.

■ Annual dividends per share & payout ratio
(Yen)

(%)

150

500

126.3

400

120

300
200
100
0

49.6

51.2

100

110

2006

2007

66.8

66.6
160

160

170

72.2
180

200

220

60.2

57.9

240
73.4

245
78.1

250

95.1

99.7

255

255

90
60

68.7

30

2008

2009

Annual dividends per share (left axis)

2010

2011

2012

Payout ratio (right axis)

2013

2014

2015

2016

2017

2018

0

(Fiscal Year)

Lawson Store100, Inc. (consolidated subsidiary)
Established on November 14, 2013, Lawson Store100, Inc. succeeded to the operational functionsof Ninety-nine Plus, Inc., including its store operation and product development, on February 1, 2014
through an absorption-type company split. The former succeeded to the latter’s store-related assets
including franchise agreements for the LAWSON STORE 100 (including Lawson Mart). Effective
March 2016, the corporate name was changed from Lawson Mart, Inc. to Lawson Store100, Inc.
LAWSON STORE 100 meets the needs of a wide range of customers from children to seniorcitizens, with a focus on single person and homemaker customers, by offering three types of value,
the “diverse merchandise selection” of a supermarket, the “convenience” of a convenience store andthe easy-to-understand “standardized prices” of a 100-yen shop.
For the year ended February 28, 2019, Lawson Store100, Inc. had a total of 806 stores at theperiod-end date. Operating loss stood at 300 million yen. This was mainly attributable to the factthat net sales of existing stores decreased to 98.7% compared to the previous fiscal year due to thecontinuing fierce competitive environment.
■Lawson Store100, Inc.

(Millions of Yen)

(Fiscal Year)2019.22018.22017.2

2016.2

2015.2Gross operating revenues

42,29544,942

48,111

50,67578,232

Operating income (loss)

（348）

（325）

545

375

1,763

Net income (loss)

（191）

（381）

441

286

985

*Consolidated starting from February 2013

SCI, Inc. (consolidated subsidiary)
SCI, Inc. (“SCI”) was established by Lawson, Inc. in July 2012 as a 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. The Company
aims to build a manufacturing retailer business model that coherently covers the entire supply chain

13

Lawson, Inc. MD&A 2019

Financial Section

from the upstream to the downstream, reducing 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. for attaining greater product competitiveness and assisting the sales promotion efforts
of franchise owners. In the medium term, the Company will use the know-how in this area to grow thebusiness of supplying raw materials and merchandise to non-group customers.
For the year ended February 28, 2019, operating income amounted to 2.4 billion yen which
was about the same level with the previous fiscal year.
■ SCI, Inc.

(Millions of Yen)

(Fiscal Year)2019.22018.22017.2

2016.2

2015.2

2014.2Gross operating revenue

309,482

284,300

256,143

191,299

87,63874,460Operating income

2,489

2,385

1,860

2,365

1,128

509

Ordinary income

2,494

2,392

2,065

2,369

1,128

510

Net income

1,624

1,558

1,395

1,423

687

300

* Consolidated starting from September 2012

Lawson Okinawa, Inc. (equity-method affiliate)
In January 2009, Lawson, Inc. entered into a business alliance agreement with SAN-A CO.,LTD. (“SAN-A”), the largest integrated retailer in Okinawa, concerning operations in theprefecture. Through this alliance with SAN-A, an unrivalled player there with a loyal customer
following, we desire to deliver services better suiting local needs and to offer a merchandiseand store environment befitting local consumer tastes, in a prefecture that has unique lifestyleand food preferences. To this end, we established Lawson Okinawa, Inc. in October 2009 asa 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 for the former to be run as a
joint venture.
For the year ended February 28, 2019, Lawson Okinawa, Inc. had a total of 233 storesat the period-end date, and operating income stood at 1.8 billion yen, an increase of 10.0%
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.

Lawson Sanin, Inc. (consolidated subsidiary)
In September 2016, Lawson Inc. established Lawson Sanin, Inc. (Lawson Sanin) in Yonago City,
Tottori Prefecture based on joint investment with Poplar Co., Ltd., (Poplar) a convenience store
operator based in Hiroshima City. In November 2016, Lawson Sanin, Inc. started a regional franchisebusiness. In addition to two experimental double-brand convenience stores opened in November
2015, 52 LAWSON stores in Tottori, Shimane and Yamaguchi Prefectures were transferred to a joint“LAWSON POPLAR” brand. Lawson Sanin, Inc. operates 292 stores (including existing LAWSON
stores in Tottori and Shimane Prefectures). In June 2019, Company made Lawson Sanin into awholly-owned subsidiary. “LAWSON■ Lawson Sanin, Inc.
(Millions of Yen)
POPLAR” brand stores are function(Fiscal Year)2019.22018.22017.2
reinforcing stores selling “POP Ben”
Gross operating revenues
7,527
7,876
2,460
boxed meals that are prepared on
Operating income (loss)
（56）
403
582
site, under LAWSON FC packages.
Net income (loss)
（75）
148
254
For the year ended February 28,* Income began to be reflected in the consolidated accounts, startingfrom November 20162019, operating income stood at 400
million yen, down 30.7% from theprevious fiscal year.

(Millions of Yen)

(Fiscal Year)2019.22018.22017.2

2016.2

2015.2

2014.2Gross operating revenues

7,700

7,090

6,509

5,605

4,674

4,199

Operating income

1,824

1,658

1,637

1,407

1,183

1,051

Net income

1,107

1,069

1,081

954

738

792

Lawson Minamikyushu, Inc. (equity method affiliate)
Lawson Minamikyushu, Inc. (“Lawson Minamikyushu”) was established 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, 2019, Lawson Store100, Inc. had a total of 197 stores at theperiod-end date, and operating income stood at 100 million yen, a decrease of 3.7% compared to a
year-ago period. We will continue to have Lawson Minamikyushu strive to build a store environment
meeting local needs appropriately, thus growing Lawson chain stores in Kagoshima in the coming
years.

Lawson, Inc. MD&A 201914

■ Lawson Minamikyushu, Inc.

(Millions of Yen)

■ SEIJO ISHII CO., LTD.

(Millions of Yen)

(Fiscal Year)2019.22018.22017.2

2016.2

2015.2(Fiscal Year)2019.22018.22017.2

2015.122014.12Gross operating revenues

4,412

4,317

4,007

3,756

3,595

Gross operating revenues

87,22981,95785,824

68,993

17,881

Operating income (loss)

156

162

94

（183）

（422）

Operating income

8,171

7,611

7,795

5,795

1,547

Net income (loss)

95

111

（93）

（591）

（472）

Net income

4,885

4,339

4,616

2,625

1,086

* Income began to be reflected in the consolidated accounts, starting from March 2014

*Consolidated starting from February 2013

Lawson Kochi, Inc. (equity-method affiliate)

Lawson Entertainment, Inc. (consolidated subsidiary)

In December 2014, Lawson, Inc. entered into a corporate franchise contract with SUNNY MART Co.,
Ltd. (“SUNNY MART”), which was a supermarket operator serving chiefly Kochi Prefecture and was theparent of Three-F Chu-Shikoku Co., Ltd. This was followed by SUNNY MART converting Three-F storesoperated by the company into LAWSON stores on a step-by-step basis. In April 2015, Lawson Kochi,
Inc. was established as a joint venture between SUNNY MART and Lawson, Inc. (with the former and thelatter holding 51% and 49% equity stakes in the joint venture, respectively). Thus, all LAWSON stores in
Kochi Prefecture began to be operated by Lawson Kochi, Inc.

Lawson HMV Entertainment, Inc. (“Lawson HMV Entertainment”) distributes tickets for concerts, sporting
events, theaters and cinemas mainly through the multimedia information terminal “Loppi” in Lawson
stores and the “L-Tike.com” website. The company is particularly strong in the areas of J-pop andsporting 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 nameto Lawson Ticket in 1996 before being included in Lawson, Inc.’s scope of consolidation as a subsidiaryin 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 waslisted on the Osaka Securities Exchange JASDAQ Market but was delisted in June 2010. The company
then became a wholly-owned subsidiary of Lawson, Inc. in July 2010 through a share swap transaction.
In September 2011, Lawson Entermedia, Inc. and our subsidiary HMV Japan K.K.* merged to form
Lawson HMV Entertainment with the aim of achieving increased synergy between the entertainment ande-commerce (EC) businesses of the Lawson Group, going forward. In June 2018, the corporate namewas changed to Lawson Entertainment, Inc.
We leverage the Group’s solid e-commerce business platform to provide one-stop shopping
convenience to customers by enabling those buying concert tickets and CDs for a given artist separately
in the past to make purchases in one single location. The company generates good synergy between
the HMV brand’s competitive edge in the CD music industry and Lawson Ticket’s prowess in the ticket
distribution industry.
As for Lawson Entertainment’s revenue structure, commission revenues on ticket sales currently
account for the bulk of its revenues. Its operating revenues mainly comprising commissions are recorded
as “operating revenues-other” in the consolidated statement of income of Lawson, Inc.

For the year ended February 28, 2019, the number of LAWSON stores in the prefecture stood at
140 at the period-end date, and the operating income of Lawson Kochi, Inc. amounted to 300 million yen,a decrease of 22.2% compared to the previous fiscal year. We will continue to have Lawson Kochi strive tobuild a store environment■Lawson Kochi, Inc.
(Millions of Yen)
meeting local needs(Fiscal Year)2019.22018.22017.2
2016.2Gross operating revenues
4,388
4,321
4,482
4,208
appropriately, thus growing
Operating income
387
498
463
430
Lawson chain stores in
Net income
300
290
298
286
Kochi in the coming years.
* Income began to be reflected in the consolidated accounts, starting from April 2015

SEIJO ISHII CO., LTD. (consolidated subsidiary)
SEIJO ISHII CO., LTD (“Seijo Ishii”) strives to enhance the brand appeal and corporate value. At thesame time, the company leverages its strengths, including product development capabilities, knowhow
as a manufacturing retailer, and sales techniques, in order to strengthen the domestic convenience
store business.
With regard to performance of the year ended February 28, 2019, due mainly to stable sales ofdelicatessen items prepared in the central kitchen, sales of existing stores were favourable as 101.5%
compared to the previous fiscal year. In addition, opening new stores is smooth as planned, among otherfactors, operating income stood at 8.1 billion yen, an increase of 7.3% compared to the previous fiscal year.

15

Lawson, Inc. MD&A 2019

Financial Section

For the year ended February 28, 2019, operating income increased by 26.1% compared to theprevious fiscal year due mainly to acquisition of large-scale contents.
* HMV Japan K.K. (a consolidated subsidiary of Lawson, Inc. until August 31, 2011) was a 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 businessand achieve increased synergies with Lawson Entermedia, Inc.

■ Lawson Entertainment, Inc.

(Millions of Yen)

(Fiscal Year)2019.22018.22017.2

2016.2

2015.2

2014.2Gross operating revenues

54,54153,26150,42350,20546,01845,314

Operating income

2,335

1,851

2,119

2,469

3,094

2,819

Net income

2,470

1,524

1,466

1,644

2,918

2,450

Lawson Bank, Inc. (consolidated subsidiary)
Lawson ATM Networks, Inc. was established in 2001 with investments from Mitsubishi Corporation,
partner banks and Lawson, Inc., as a provider of ATM services for LAWSON stores. The company
installed ATMs at certain LAWSON stores that year to launch an ATM service. Subsequently, in June
2018, Lawson Bank Preparatory Company, Inc. succeeded to the ATM business of Lawson ATM
Networks, Inc. which installs jointly operated ATMs in LAWSON stores through an absorption-typecompany split. In July 2018, the corporate name changed to Lawson Bank, Inc. and it started providing
services to customers on October 15, 2018.
In the jointly operated ATM business, in addition to increasing partner financial institutions, ATMs
are installed to the sites other than LAWSON stores. As of end February 2019, the number of ATMs in
operation at LAWSON stores nationwide totaled 13,459 and the number of partner financial institutions
nationwide totaled 111 including online banks.

United Cinemas Co., Ltd. (consolidated subsidiary)
In August 2014, Lawson, Inc. acquired all shares in United Entertainment Holdings, Inc., a holding
company of cinema operator United Cinemas Co., Ltd. (“UC”), in a deal conducted via Lawson
HMV Entertainment United Cinemas Holdings, Inc., a firm newly established by present Lawson
Entertainment, Inc. Adding the industry’s top-class firm to the Lawson Group steps up its contents
holder service as an integrated entertainment distributor and boosts its existing business lines’ customer
drawing power through collaborating with movie contents holders and encouraging its Lawson, HMV,

e-commerce and cinema operations to guide customers to each other’s service.
For the year ended February 28, 2019, operating income was 2.6 billion yen, up 6.4% from theprevious fiscal year, due mainly to an increase of the number of sites and hit films.
■United Cinemas Co., Ltd.

(Millions of Yen)

(Fiscal Year)2019.22018.22017.2

2016.2

2014.12Gross operating revenues

23,65322,243

22,637

24,9605,773

Operating income

2,675

2,512

2,457

2,338

156

Net income (loss)

2,687

1,694

2,137

2,260

（112）

* Consolidated starting from September 2014

Shanghai Lawson, Inc. (consolidated subsidiary)
We were the first Japanese convenience store company to gain a foothold in China with our first store
opening in 1996. We established a joint venture, Shanghai Hualian Lawson, Inc. (“Shanghai Hualian
Lawson”) in Shanghai, with Lawson, Inc. taking a 70.0% equity stake in the firm and China HualianGroup 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 transferred, in 2004, to the Hualian Group 21.0% of equity interest in Shanghai Hualian
Lawson, out of our 70.0% equity interest in the firm, reducing our ownership 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%, thecompany was included in Lawson, Inc.’s scope of consolidation as a subsidiary. Lawson, Inc. carriedout the above-mentioned incremental share acquisition program in order to accelerate its efforts topursue the Japanese-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 performed by concluding a share transfer agreement with Bailian Group Co., Ltd. (“BailianGroup”)*, whose retail division restructuring was underway. Our equity interest in Shanghai Hualian
Lawson was raised even further since, standing at 100% as of February 28, 2018. On February 28,
2017, Shanghai Hualian Lawson, Inc. changed its corporate name to Shanghai Lawson, Inc.
Subsequently, in February 2017, Shanghai Hualian Lawson, Inc. changed its corporate name to
Shanghai Lawson, Inc. Our equity interest in the company is 100%.
From now on, the company aims to upgrade the quality of LAWSON stores in Shanghai, theLawson, Inc. MD&A 201916

economic center of China, and achieve increased store brand appeal while focusing on ROI, a criterion
used for new store openings in the country, as in Japan.
For the year ended February 28, 2019, operating income turned positive from the previous fiscal
year as opening a significant number of new stores improved profit. The total number of LAWSON
stores in operation stood at 1,227 as of February 28, 2019.
* Through a restructuring of China s retail industry driven by the national government, the Hualian Group was merged into the BailianGroup. In the course of this restructuring, all shares in the Hualian Group were transferred to the Bailian Group in December 2008.

■ Shanghai Lawson, Inc.

(Millions of Yen)

Dalian Lawson, Inc. (consolidated subsidiary)With a population of some six million (2018 JETRO survey), Dalian is the biggest port city in Northeast
China. Following an invitation by the city of Dalian to commence convenience store operations there,
we established Dalian Lawson, Inc. in September 2011 as a joint venture with local enterprise Dalian
Acasia Fast Foods Co., Ltd. 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 146 asof February 28, 2019.
■ Dalian Lawson, Inc.

(Millions of Yen)

(Fiscal Year)2018.122017.122016.122015.122014.122013.12(Fiscal Year)2018.122017.122016.122015.122014.12Gross operating revenues

24,35919,905

13,561

8,531

1,360

1,290

Gross operating revenues

2,463

2,371

2,043

1,502

995

516

28

（567）

（555）

（755）

（646）

（404）

Operating income (loss)

0

4

（183）

（312）

（313）

（227）

（241）

（1,025）（1,347）（1,099）（925）（1,568）

（31）

（28）

（190）

（344）

（338）

（211）

Operating income (loss)
Net income (loss)* Starting from the year ended December 31, 2015, the profits (losses) of Shanghai Le Song Trading Co., Ltd., Shang Hai
Gong Hui Trading Co., Ltd. and Zhejiang Lawson, Inc., each located in Shanghai and surrounding area, were added tothe profit (loss) of Shanghai Hualian Lawson, Inc.

Chongqing Lawson, Inc. (consolidated subsidiary)
Populated by 31 million people (2018 JETRO survey), Chongqing is one of the world’s biggest cities,
and is a direct-controlled municipality of China. The city has continued to enjoy double-digit economic
growth for 10 consecutive years until 2016 (2015 JETRO survey). Up to 2017, this double-digit economic
growth rate exceeded the national average and that of coastal cities such as Shanghai. It is against thisbackdrop that potential demand for convenience stores in China’s fast-growing inland cities is increasing.
We established Chongqing Lawson, Inc. in April 2010 to gain a foothold in inland China as the firstJapanese convenience store company to operate there at the invitation of the city of Chongqing andthe first local LAWSON store was opened. The LAWSON store network has continued to grow steadily
since, bringing the total store count to 198 as of February 28, 2019.
■ Chongqing Lawson, Inc.

(Millions of Yen)

(Fiscal Year)2018.122017.122016.122015.122014.12Gross operating revenues

3,461

3,225

3,586

4,400

3,474

1,843

Operating income (loss)

（282）

（306）

（452）

（778）

（904）

（840）

Net income (loss)

（378）

（413）

（623）

（973）

（1,047）（833）

2013.12Net income (loss)

Beijing Lawson, Inc. (consolidated subsidiary)
In China, Beijing is a big city with apopulation of about 21.7 million (2018
JETRO survey). We established Beijing
Lawson, Inc. in May 2013. The company
opened 35 stores in this fiscal year underreview, bringing the total number ofstores to 108 as of the end of February
2019.

Lawson, Inc. MD&A 2019

■ Beijing Lawson, Inc.

(Millions of Yen)

(Fiscal Year)2018.122017.12Gross operating revenues

4,480

3,106

2,168

Operating income (loss)

（463）

（635）

（643）

Net income (loss)

（591）

（687）

（634）

2016.12* Beijing Lawson, Inc. has been included in the scope of consolidation from2016. The operating result above of Beijing Lawson, Inc. includes theoperating result of BEIJING LUOSONG Co., Ltd.

Saha Lawson Co., Ltd. (consolidated subsidiary)
In Thailand, we 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. The number ofstores stood at 120 as of February 28, 2019.
■ Saha Lawson Co., Ltd.

(Millions of Yen)

(Fiscal Year)2018.122017.122016.122015.122014.12Gross operating revenues

9,851

8,271

7,171

6,962

7,800

5,959

Operating income (loss)

（299）

（653）

（305）

（251）

（655）

（338）

Net income (loss)

（280）

（767）

（396）

（308）

（831）

（525）

* Consolidated starting from January 201317

2013.122013.12Financial Section

Future Outlook
The business environment remains challenging due to labor shortages, rising labor costs
and intensifying competition across boundaries of business categories, among other factors.
Under these circumstances, for the year ending February 2020, following the three year’s
solidifying period for the business foundation through implementing “1000-Day Action Plan,”in our domestic convenience store business, we will deploy sales promotion campaigns suchas “further reinforced promotions on purchases in evening and night time” and “bolstering ourcustomer living assistance service” through providing products corresponding to customer
needs. We will also aim to maximize the value of nationwide real store network, a place ofcommunication with our customers, while strengthening “franchise stores support” throughour continued effort to improve store operation efficiency by making the best use of digitaltechnologies.
In order to serve increasingly diverse customer needs, we will strengthen Lawson original
products and frozen foods by assuming life scenes by time zones and customer segments topursue “overwhelmingly delicious” foods. In addition, through promotion of menu deployment
focusing on health as well as deliciousness and development of eco-friendly products, we willconcentrate on creating stores to satisfy our customers.

Measures to cope with labor shortages
To cope with labor shortages, we will further strengthen franchise store support measures bypromoting labor saving and automation for store operations and utilizing POS cash registers
introduced to all stores in the previous fiscal year, we will deploy “self-checkout registers”
which allow customers to purchase products by scanning barcodes. In addition, by promoting
services such as “Lawson Smartphone Cash Register,” our mobile self-service payment service
option based on a dedicated app, we will reduce store workload related to register operations,and at the same time, we will improve customer convenience by, for example, easing thecongestion.

2,000 in China. We aim to expand business by entire group together with both Seijo Ishii
business and entertainment-related business.

Business Performance Outlook for Fiscal Year Ending February 29, 2020
We make allowance for an increase of expense for franchise store support as labor shortages
have become severer beyond our expectation; as a result, consolidated operating income is
projected to be 60.8 billion yen, almost same as the fiscal year under review. With regard to
new store openings in particular, we will narrow down the number of new store openings to
700 to further improve quality, on the other hand, in order to facilitate closings of low profitability
stores and replacement with higher profitability stores, we plan to close 700 stores. As a result,net increase of the number of stores is projected to be zero.
Breakdown of increase/decrease of operating income is as follows: by increasing sales ofexisting stores to100.5% year on year and improving gross profit margin by 0.2% year on year,
profit will be increased by approximately 4.0 billion yen. Additional increase of approximately 2.0
billion yen will be generated by closing low profitability stores. On the other hand, approximately
4.0 billion yen profit decrease is expected for IT investment to help labor shortages as well as
renewal of store computers, and additional approximately 2.0 billion yen profit decrease is also
expected for measures against labor shortages and increase of environmentally conscious
investment. In addition, by recording loss related to closing stores, consolidated Ordinary
income is projected to decrease by 3.2 billion yen to 54.5 billion yen and consolidated net
income is expected to decrease by 7.5 billion yen to 18.0 billion yen. We aim to achieve thisprofit plan in the fiscal year ending February 29, 2020 and create a solid basis upon which tobuild future growth.

Business expansion by the entire group
For businesses other than domestic convenience store business, in the fiscal year ending
February 2020, we will promote steady business development of Lawson Bank by increasing
partnership with local financial institutions focusing on ATM business, and at the same time,
we will promote development of payment infrastructure business corresponding to cashlesssociety. With regard to overseas business, we will further expand our business in a new stage
followed by our success as Shanghai subsidiary company, the core of our China business
operation, achieved surplus in the fiscal year under review and the number of stores exceeded

Lawson, Inc. MD&A 201918

Consolidated Balance Sheet
Lawson, Inc. and its Consolidated Subsidiaries
February 28, 2019

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

2019

2019

2018

Cash and cash equivalents¥354,236¥30,121$3,195,057

4

4

36

Due from franchised stores (Note 3)

47,18046,599425,543

Other

124,067

84,705

1,119,031

(124)

(29)

(1,118)

Lease receivables (Note 4)

19,121

16,426

172,463

Inventories

20,862

18,914

188,166

Time deposits
Accounts receivable:

Allowance for doubtful accounts

Deferred tax assets (Note 15)

4,395

3,411

39,641

Other54,25831,709489,385

623,999

231,860

5,628,204

9,053

9,582

81,654

387,981369,567

3,499,423

Total current assets
PROPERTY AND STORE EQUIPMENT:Land (Notes 6 and 7)
Buildings (Note 6)
Furniture, fixtures, and equipment (Note 6)

74,72974,401

674,024

Lease assets (Note 6)

252,577

213,5612,278,137

Other (Note 6)

817

791

7,369

725,157

667,9026,540,607(342,857)(317,966)(3,092,424)

382,300

349,9363,448,183

Investment securities (Note 5)

13,54913,376122,206

Investments in associated companies

18,297

15,172

165,031

Long-term loans receivable

44,02447,425397,078

Goodwill (Note 6)

46,83647,947422,441

Software (Note 6)

49,792

41,602

449,103

Total
Accumulated depreciation
Net property and store equipment
INVESTMENTS AND OTHER ASSETS:

19

Lawson, Inc. MD&A 2019

Millions of Yen
ASSETS

CURRENT ASSETS:

Thousands of
U.S. Dollars(Note 1)

2019

2018

2019

Trademark right

9,468

10,07585,397

Lease deposits

107,034

100,686

965,401

Deferred tax assets (Note 15)

26,76024,406

241,364

Other (Note 6)

21,266

18,866

191,809(835)(1,095)(7,531)

Allowance for doubtful accounts
Total investments and other assets
TOTAL

336,191

318,460

3,032,299¥1,342,490¥900,256$12,108,686* See notes to consolidated financial statements.
* Japanese yen figures are rounded down to the nearest million yen. US dollar figures are rounded to the nearest thousand dollars.

Financial Section

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

2019

2019

2018

Accounts payable:
Trade (Notes 8 and 19)
Due to franchised stores (Note 9)¥123,409¥118,175$1,113,096

1,611

2,594

14,531

101,693

60,441

917,227

Short-term loans (Note 10)

126,600

36,3401,141,878

Current portion of long-term debt (Note 10)

88,75033,639800,487

Income taxes payable

6,684

6,880

60,287

Deposits received

131,805

109,629

1,188,825

Other (Note 12)17,971

11,525

162,091

598,523

379,223

5,398,422

OtherTotal current liabilities

Net defined benefit liability (Note 11)15,126

13,781

136,430

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

301

271

2,715

Long-term debt (Note 10)391,441

169,087

3,530,630

Asset retirement obligations (Note 12)

31,102

29,063

280,527

711

2,617

6,413

23,304

24,768210,192

461,985

239,587

4,166,907

Common stock̶authorized, 409,300,000
shares in 2019 and 2018; issued,
100,300,000 shares in 2019 and 2018

58,50758,507527,708

Capital surplus

46,984

46,690423,776

Other
Total long-term liabilities

LIABILITIES AND EQUITY

2019

2019

2018

(1,029)(1,041)(9,282)Net unrealized gain on available-for-salesecurities

3,349

2,084

30,207

Land revaluation difference (Note 7)

(567)

(576)

(5,114)Foreign currency translation adjustments

3,931

4,596

35,456

Defined retirement benefit plans

(848)

(727)

(7,649)276,731

275,853

2,495,995

5,251

5,593

47,362

Accumulated other comprehensive
income:Total
Noncontrolling interests
Total equity
TOTAL

LONG-TERM LIABILITIES:Deferred tax liabilities (Note 15)

Millions of Yen
Treasury stock̶at cost, 241,897 shares in2019 and 244,849 shares in 2018

CURRENT LIABILITIES:

Thousands of
U.S. Dollars(Note 1)

281,982

281,4462,543,357¥1,342,490¥900,256$12,108,686* See notes to consolidated financial statements.

EQUITY (Note 13):

Stock acquisition rights
Retained earnings

216

195

1,948

166,188

166,125

1,498,945

Lawson, Inc. MD&A 201920

Consolidated Statement of Income
Lawson, Inc. and its Consolidated Subsidiaries
Year Ended February 28, 2019

Thousands of
U.S. Dollars(Note 1)Millions of Yen
2019

Millions of Yen

2019

2018

OPERATING REVENUES:2019
INCOME BEFORE INCOME TAXESFranchise commissions from
franchised stores¥302,136¥289,233$2,725,138

Net sales

288,580

264,735

2,602,868

Current

Other

109,932

103,357

991,539

Deferred

Total operating revenues

700,648657,325

6,319,545

Cost of sales (Note 19)

198,040

181,374

1,786,236

Selling, general, and administrative expenses

441,826

410,130

3,985,082

Total costs and operating expenses

639,866

591,504

5,771,318

Operating income

60,78265,821

548,227

Interest expense̶net(1,735)(1,187)(15,649)

Compensation income

382

897

3,445

(1,655)(1,304)(14,927)

Equity in earnings of unconsolidated
subsidiaries and associated companies

321

694

2,895

Gain on sales of investment securities

738

2019

2018

39,87743,590359,673

18,32914,190165,320

INCOME TAXES (Note 15):

Total income taxes
NET INCOMECOSTS AND OPERATING EXPENSES:

Thousands of
U.S. Dollars(Note 1)

(4,015)2,539(36,214)

14,314

16,729129,106

25,563

26,861

230,567

(23)

32

(208)

¥25,586¥26,829$230,775

NET INCOME ATTRIBUTABLE TONONCONTROLLING INTERESTSNET INCOME ATTRIBUTABLE TOOWNERS OF THE PARENTOTHER INCOME (EXPENSES):

Loss on cancellation of leases

Gain on sales of shares of subsidiaries
and associates

6,656
303

(225)

(368)

(2,029)Loss on disposal of property andstore equipment(4,142)(3,115)(37,359)

Impairment of long-lived assets (Note 6)(13,892)(17,534)(125,300)

Other̶net
Other expenses̶net

21

Lawson, Inc. MD&A 2019(817)

(7,369)

120

(616)

1,083

(20,905)(22,230)(188,554)

U.S. Dollars
2019

2018

PER SHARE OF COMMON STOCK(Notes 2.t and 21):
Net income̶basic¥255.71¥268.16$2.31

Net income̶diluted

255.59268.02

2.31

255

255

2.30

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

Loss on sales of non-current assets

Loss on disaster

Yen
2019

Financial Section

Consolidated Statement of Comprehensive Income
Lawson, Inc. and its Consolidated Subsidiaries
Year Ended February 28, 2019

Thousands of
U.S. Dollars(Note 1)Millions of Yen
2019
NET INCOME

2019

2018

¥25,563¥26,861$230,567

1,265

1,810

11,410(674)

36(6,079)

19

201

171

OTHER COMPREHENSIVE INCOME:
Unrealized gain on available-for-salesecurities
Land revaluation difference
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Total other comprehensive income
COMPREHENSIVE INCOME

610

2,047

5,502

¥26,173¥28,908$236,069¥26,204¥28,825$236,349

(31)

83

(280)

TOTAL COMPREHENSIVE INCOME
ATTRIBUTABLE TO (Note 17):
Owners of the parent
Noncontrolling interests* See notes to consolidated financial statements.

Lawson, Inc. MD&A 201922

Consolidated Statement of Changes in Equity
Lawson, Inc. and its Consolidated Subsidiaries
Year Ended February 28, 2019
Thousands of Shares/Millions of Yen

Common Stock

SharesBALANCE, MARCH 1, 2017

100,300

Accumulated other comprehensive income

Treasury Stock

AmountCapitalSurplus

Stock
Acquisition
Rights¥58,507¥49,084¥315

Net income attributable to ownersof the parent

Retained
Earnings¥165,162

SharesAmount(286)¥(1,211)

Net UnrealizedGain(Loss)on Available-forSale Securities

Land
Revaluation
Difference¥274¥(619)

Foreign
Currency
Remeasurements
Translationof defined
Adjustments
benefit plans¥4,611¥(928)

26,829Change in the parentʼs ownershipinterest due to transactions
with noncontrolling interests(2,454)

Noncontrolling
Interests

Total¥275,195¥10,801

Total
Equity¥285,996

26,82926,829(2,454)(2,454)Year-end cash dividends, ¥125 per share(12,502)(12,502)(12,502)

Interim cash dividends, ¥127.5 per share(12,757)(12,757)(12,757)

Change of scope of consolidation

(565)

(565)

(565)

Reversal of land revaluation difference

(42)

(42)

(42)

Purchase of treasury stock
Exercise of stock acquisition rights to shares(delivery of treasury stock)60

Disposal of treasury stock0

Others̶net
BALANCE, FEBRUARY 28, 2018

1

(3)

(3)

(3)

41

173

233

233

0

0

(120)
100,300

58,507

46,690195

Net income attributable to ownersof the parent

166,125(244)(1,041)

0

1,810

43

(15)

201

1,919

(5,208)(3,289)

2,084

(576)

4,596

(727)

275,853

5,593

281,446

25,58625,58625,586Year-end cash dividends, ¥127.5 per share(12,757)(12,757)(12,757)

Interim cash dividends, ¥127.5 per share(12,757)(12,757)(12,757)

(0)

(0)

(0)

Change in the parentʼs ownershipinterest due to transactions
with noncontrolling interests

Change of scope of consolidation
Capital increase of consolidated subsidiaries

(4)

(4)

(4)

Increase by corporate division

70

70

70

Tax effect adjustment on change in equity
of prior period

224

224

224

Reversal of land revaluation difference(9)

Purchase of treasury stock
Exercise of stock acquisition rights to shares(delivery of treasury stock)4

Disposal of treasury stock0

Others̶net
BALANCE, FEBRUARY 28, 201923

Lawson, Inc. MD&A 2019

3

(9)

(9)

(1)

(1)

(1)

13

17

17

0

0

21
100,300¥58,507¥46,984¥216¥166,188(241)¥(1,029)

0

1,265

9

(665)

(121)

509

(342)

167

¥3,349¥(567)¥3,931¥(848)¥276,731¥5,251¥281,982

Financial Section

Thousands of U.S. Dollars (Note 1)
Accumulated other comprehensive income

BALANCE, FEBRUARY 28, 2018

CommonStockCapitalSurplus

Stock
Acquisition
Rights$527,708$421,124$1,759Net income attributable to ownersof the parent

Retained
Earnings

TreasuryStock

Net UnrealizedGain(Loss)on Available-forSale Securities$1,498,376$ (9,389)$18,797

Land
Revaluation
Difference$ (5,195)

Foreign
Currency
Remeasurements
Translation of defined benefit
Adjustments
plans$41,454$ (6,557)

Noncontrolling
Interests

Total$2,488,077$50,446

Total
Equity$2,538,523

230,775

230,775

230,775

Year-end cash dividends, $1.15 per share(115,063)(115,063)(115,063)

Interim cash dividends, $1.15 per share(115,063)(115,063)(115,063)

(0)

(0)

(0)

Change in the parentʼs ownershipinterest due to transactions
with noncontrolling interests

Change of scope of consolidation
Capital increase of consolidated subsidiaries

(36)

(36)

(36)

Increase by corporate division

631

631

631

2,021

2,021

(80)

(80)

(9)

(9)

(9)
152

Tax effect adjustment on change in equity
of prior period

2,021

Reversal of land revaluation difference(80)

Purchase of treasury stock
Exercise of stock acquisition rights to shares(delivery of treasury stock)

36

116

152

Disposal of treasury stock

0

0

0

Others̶net
BALANCE, FEBRUARY 28, 2019

189
$527,708$423,776$1,948$1,498,945$(9,282)

011,41081(5,998)(1,092)

4,590(3,084)

1,506$30,207$(5,114)$35,456$(7,649)$2,495,995$47,362$2,543,357* See notes to consolidated financial statements.

Lawson, Inc. MD&A 201924

Consolidated Statement of Cash Flows
Lawson, Inc. and its Consolidated Subsidiaries
Year Ended February 28, 2019

Thousands of
U.S. Dollars(Note 1)Millions of Yen
2019
Income before income taxes andminority interests¥39,877

Millions of Yen

2019

2018

OPERATING ACTIVITIES:¥43,591$359,673

Adjustments for:2019
(5,752)(9,230)(51,881)

Purchase of investment securities(5,757)(1,127)(51,926)

Proceeds from sales of investment securities

7,157

665

64,553Acquisition of associated companies(3,597)(3,920)(32,443)(2,731)(11,010)(24,632)(18,706)(18,287)(168,720)

Payments for transfer of business

Depreciation and amortization

66,84458,602602,904

Other̶net

Impairment of long-lived assets

13,892

17,534125,300

Loss on disposal of property andstore equipment

4,142

3,115

37,359

Increase in accounts receivable(41,112)(10,675)(370,813)

Increase in accounts payable

53,697

10,829484,324

Increase in deposits received

22,1796,469

200,045

Increase in allowance for retirement
benefits to employees and executive
officers and audit and supervisoryboard members
Net increase in call loans
for banking business
Other̶net

906

721

8,172

Net cash used in investing activities(180,391)

(905)

(605)

(8,164)(81,018)(91,210)(730,748)

FINANCING ACTIVITIES:Net increase in short-term loans payable

90,2605,160

814,107

Repayments of long-term debt

(46,727)(33,330)(421,458)

Cash dividends paid

(25,514)(25,259)(230,126)

Proceeds from long-term loan-payable

260,000

Payments from changes in ownershipinterests in subsidiaries that do not resultin changes in scope of consolidation
Other̶net(20,000)

2019

2018

Long-term prepaid expenses

Income taxes paid

Changes in assets and liabilities:

Thousands of
U.S. Dollars(Note 1)

2,345,089(7,799)
(82)

(11)

(739)

277,937(61,239)2,506,873

FOREIGN CURRENCY TRANSLATIONADJUSTMENTS ON CASH AND
CASH EQUIVALENTS(1,409)174(12,708)

Net cash provided by (used in)financing activities

6,876

2,040

62,019Total adjustments

88,71870,348800,199

Net cash provided by operating
activities

128,595

113,939

1,159,872

Purchases of property and store equipment(43,284)(41,537)(390,403)

NET INCREASE（DECREASE）IN CASH
AND CASH EQUIVALENTS

324,105(38,336)

2,923,289

Purchases of software and otherintangible assets(18,060)(18,534)(162,893)

CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR

30,121

67,692

271,679

Increase in long-term loans receivable(7,389)(8,580)(66,646)

10

765

89

¥354,236¥30,121$3,195,057

INVESTING ACTIVITIES:

Proceeds from collection of long-termloans receivable

5,111

5,133

46,099Payments for guarantee deposits(24,239)(24,580)(218,625)

Proceeds from collection ofguarantee deposits

18,42822,115

166,21325

Lawson, Inc. MD&A 2019

CASH AND CASH EQUIVALENTS IN
SUBSIDIARIES RESULTING FROMCHANGES IN SCOPE OF CONSOLIDATIONCASH AND CASH EQUIVALENTS,
END OF YEAR
* See notes to consolidated financial statements.

Financial Section

Notes to Consolidated Financial Statements
Lawson, Inc. and its Consolidated Subsidiaries
Year Ended February 28, 2019

1 BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESThe accompanying consolidated financial statements have been prepared ina. Consolidation̶ The consolidated financial statements include the accounts ofaccordance with the provisions set forth in the Japanese Financial Instruments

the Company and its 21 (21 in 2018) subsidiaries (collectively, the Companies").

and Exchange Act and its related accounting regulations and in accordance with

Consolidation of the remaining subsidiaries would not have a material effect on theaccounting principles generally accepted in Japan (“Japanese GAAP”), which areaccompanying consolidated financial statements.

different in certain respects as to application and disclosure requirements fromInternational Financial Reporting Standards.

Under the control and influence concepts, those entities for which the Company,
directly or indirectly, is able to exercise control over operations are fully

In preparing these consolidated financial statements, certain reclassifications andconsolidated, and those entities over which the Companies have the ability torearrangements have been made to the consolidated financial statements issued

exercise significant influence are accounted for by the equity method.

domestically in order to present them in a form which is more familiar to readers
outside Japan. In addition, certain reclassifications have been made in the 2018

Investments in three (three in 2018) associated companies are accounted for byfinancial statements to conform to the classifications used in 2019.

the equity method. Investments in 22 (23 in 2018) unconsolidated subsidiaries andassociated companies are stated at cost. If the equity method of accounting had

The consolidated financial statements are stated in Japanese yen, the currency of

been applied to the investments in these entities, the effect on the accompanying

the country in which Lawson, Inc. (the “Company") is incorporated and operates. The

consolidated financial statements would not be material.

translations of Japanese yen amounts into U.S. dollar amounts are included solely forthe convenience of readers outside Japan and have been made at the rate of ¥110.87

All significant intercompany balances and transactions have been eliminatedto $1, the approximate rate of exchange at February 28, 2019. Such translations

in consolidation. All material unrealized profit included in assets resulting fromshould not be construed as representations that the Japanese yen amounts could betransactions within the Companies has been eliminated.

converted into U.S. dollars at that or any other rate.
The excess of the cost of the Company s investments in consolidated subsidiaries
Mitsubishi Corporation (“Mitsubishi") owns 50,150 thousand shares of common stock

and associated companies over the fair value of the net assets at the dates ofof the Company (including indirect holdings) as of February 28, 2019, which represents

acquisition is being amortized over a period not exceeding 20 years.

50.12% of the total voting rights of the Company. Accordingly, Mitsubishi is the parent
company.

Lawson, Inc. MD&A 201926

b. Fiscal Year End of the Consolidated Subsidiaries̶ The fiscal year end of

been directly recorded in equity; (c) expensing capitalized development costs ofChongqing Lawson, Inc.; Shanghai Lawson, Inc.; Dalian Lawson, Inc.; Lawson

R&D; and (d) cancellation of the fair value model of accounting for property, plant(China) Holdings, Inc.; Saha Lawson Co.; Ltd., Shanghai Le Song Trading Co.;and equipment and investment properties and incorporation of the cost model ofLtd., Shang Hai Gong Hui Trading Co.; Ltd., Zhejiang Lawson, Inc.; Beijing

accounting.

Lawson, Inc.; and BEIJING LUOSONG Co., Ltd. is December 31. In orderto prepare the consolidated financial statements, the Company used thesed. Unification of Accounting Policies Applied to Foreign Associated Companies

companies financial statements prepared as of such fiscal year end, andAccounted for by Using the Equity Method̶ In March 2008, the ASBJ issued

significant transactions which occur between December 31 and the consolidated

ASBJ Statement No. 16, Accounting Standard for Equity Method of Accounting

fiscal year end are adjusted as required for consolidation.

for Investments. The standard requires adjustments to be made to conform

The fiscal year end of Lawson Bank, Inc. is March 31. In order to prepare theassociate s accounting policies for similar transactions and events under similar

consolidated financial statements, the Company used this subsidiary s provisional

circumstances to those of the parent company when the associate s financial

settlement of accounts as of the Company s fiscal year end.

statements are used in applying the equity method, unless it is impracticable
to determine adjustments. In addition, financial statements prepared by foreign

The fiscal year end date for the other consolidated subsidiaries is the same as thatassociated companies in accordance with either International Financial Reportingof the Company.

Standards or generally accepted accounting principles in the United States
tentatively may be used in applying the equity method if the following items arec. Unification of Accounting Policies Applied to Foreign Subsidiaries for the

adjusted so that net income is accounted for in accordance with Japanese GAAP,

Consolidated Financial Statements̶ In May 2006, the Accounting Standards

unless they are not material: (a) amortization of goodwill; (b) scheduled amortization

Board of Japan (ASBJ) issued ASBJ Practical Issues Task Force (PITF) No.

of actuarial gain or loss of pensions that has been directly recorded in equity; (c)18, Practical Solution on Unification of Accounting Policies Applied to Foreign

expensing capitalized development costs of R&D; and (d) cancellation of the fair

Subsidiaries for Consolidated Financial Statements. PITF No. 18 prescribes thatvalue model of accounting for property, plant, and equipment and investment

the accounting policies and procedures applied to a parent company and its

properties and incorporation of the cost model of accounting.

subsidiaries for similar transactions and events under similar circumstances should

27

in principle be unified for the preparation of the consolidated financial statements.

e. Business Combinations̶ Business combinations are accounted for using the

However, financial statements prepared by foreign subsidiaries in accordancepurchase method. Acquisition-related costs, such as advisory fees or professionalwith either International Financial Reporting Standards or generally accepted

fees, are accounted for as expenses in the periods in which the costs are incurred.

accounting principles in the United States of America tentatively may be used forIf the initial accounting for a business combination is incomplete by the end of

the consolidation process, except for the following items that should be adjusted

the reporting period in which the business combination occurs, an acquirer shallin the consolidation process so that net income is accounted for in accordance

report in its financial statements provisional amounts for the items for whichwith Japanese GAAP, unless they are not material: (a) amortization of goodwill;

the accounting is incomplete. During the measurement period, which shall not(b) scheduled amortization of actuarial gain or loss related to pensions that has

exceed one year from the acquisition, the acquirer shall retrospectively adjust theLawson, Inc. MD&A 2019

Financial Section

provisional amounts recognized at the acquisition date to reflect new information

additional guarantee deposits equal to twice the average monthly sales amounts

obtained about facts and circumstances that existed as of the acquisition date andof the respective store and pay a lower commission percentage.

that would have affected the measurement of the amounts recognized as of that
date. Such adjustments shall be recognized as if the accounting for the business

The term of a franchise agreement is effective primarily for 10 years from the

combination had been completed at the acquisition date. The acquirer recognizescommencement date of a new store's operation as a franchised store and may be

any bargain purchase gain in profit or loss immediately on the acquisition dateextended or renewed upon expiration subject to renegotiation of contract terms

after reassessing and confirming that all of the assets acquired and all of the

between the Company and the franchisee.

liabilities assumed have been identified after a review of the procedures used in
the purchase price allocation. A parent s ownership interest in a subsidiary might

The franchise agreement usually provides that the franchised store shall make achange if the parent purchases or sells ownership interests in its subsidiary. The

cash payment to the Company in the amount of ¥1 million upon commencement.

carrying amount of noncontrolling interests is adjusted to reflect the change in theUpon receipt of such payment, ¥1 million is credited to income of the Company as

parent s ownership interest in its subsidiary while the parent retains its controlling

Operating revenues̶Franchise commissions from franchised stores for services

interest in its subsidiary. Any difference between the fair value of the consideration

related to the opening of the LAWSON store. The remaining amount received

received or paid and the amount by which the noncontrolling interest is adjusted

by the Company is credited to the Due to franchised stores account and thenis accounted for as capital surplus as long as the parent retains control over its

applied to working capital for purchases of merchandise and supplies for thesubsidiary.

franchised store.

f. Franchise Agreements and Basis for Recognizing Franchise Commissions̶As part of the contractual obligations of the franchisor under the agreement, the

The Company operates principally in a single industry, referred to as theCompany generally provides franchisees with furniture, fixtures, and equipment

convenience store business, with its own stores and franchised stores. The

designed for the LAWSON stores. In some cases, franchisees may also be

Company allows each independent franchisee to operate relatively small-sized

provided with the land or buildings for the stores. However, the Company does

convenience stores using specific designs and LAWSON brand names, andnot require the franchisees to make lease payments related to the stores. Instead,provides related managerial or technical know-how under a franchise agreement.

a higher percentage applicable to the gross margin would be used as the basis

Under the agreement, all franchised stores are provided with a variety of services

for determining the franchise commissions. The portion of franchise commission

and advice on the operation of convenience stores from the Company as theattributable to property and store equipment leases is not separately accounted

franchisor. In return, such franchised stores are required to pay continuing

for by the Company.

franchise commissions to the Company based on certain percentages of therespective franchised store s gross margin. As the franchisor, the Company
accounts for franchise commissions on an accrual basis by reference to thegross margin earned by each franchised store and the applicable commission
percentage. According to the franchise agreement, a franchised store may pay
Lawson, Inc. MD&A 201928

g. Cash and Cash Equivalents̶ Cash and cash equivalents include cash on hand,k. Long Lived Assets̶ The Companies review their long-lived assets for impairment

demand deposits, and short-term investments, which mature or become due

whenever events or changes in circumstance indicate the carrying amount ofwithin three months of the date of acquisition and which are readily convertible into

an asset or asset group, mainly by each store, may not be recoverable. An

cash and are exposed to insignificant risk of changes in value.

impairment loss would be recognized if the carrying amount of an asset or asset
group exceeds the sum of the undiscounted future cash flows expected to result

h. Inventories ̶ Substantially all inventories are stated at the lower of cost,from the continued use and eventual disposition of the asset or asset group. The

determined by the retail method as generally applied in the retail industry or by the

impairment loss is measured as the amount by which the carrying amount of thegross average method, or net selling value.

asset exceeds its recoverable amount, which is the higher of the discounted cash
flows from the continued use and eventual disposition of the assets or the net

i. Marketable and Investment Securities̶ Marketable and investment securities

selling price at disposition.

are classified and accounted for, depending on managementʼs intent, as follows:(1) held-to-maturity debt securities, which are expected to be held to maturity, withthe positive intent and ability to hold to maturity are reported at amortized costl. Software̶ Software used by the Companies is amortized using the straight line

method based on the estimated useful life (primarily five years).

and (2) available-for-sale securities, which are not classified as the aforementioned
securities, are stated at fair value based on market quotations. Unrealized gains
and losses, net of applicable taxes, are reported in a separate component of

m. Trademark Rights̶ Trademark rights are amortized using the straight line method

based on the estimated useful life (primarily 20 years).

equity. The cost of securities sold is determined based on the moving-averagemethod.

n. Net Defined Benefit Liability̶ In calculating the retirement benefit obligation, inorder to attribute the estimated amount of retirement benefits in the period up to
Nonmarketable investment securities are stated at cost determined by the moving-

the end of the current fiscal year, the obligation is based on the benefit formula

average method. For other-than-temporary declines in fair value, nonmarketable

method.

investment securities are reduced to net realizable value by a charge to income.
Prior service cost is amortized starting from the fiscal year incurred mainly on aj. Property and Store Equipment ̶ Property and store equipment are statedat cost, except for land (see Note 7). Depreciation is computed mainly by thestraight-line basis over a certain period (10 years) within the average remaining
service period of employees at the time of occurrence.

straight-line method at rates based on the estimated useful lives of the assets. The
range of useful lives is principally from 10 to 34 years for buildings and structures

Actuarial differences are mainly amortized from the following fiscal year on aand from 5 to 8 years for furniture, fixtures, and equipment.

straight-line basis over a certain period (10 years) within the average remaining
service period of employees at the time of occurrence.

The useful lives for lease assets are the terms of the respective leases.
Certain consolidated subsidiaries apply the simplified method to estimate the29

Lawson, Inc. MD&A 2019

Financial Section

amount required for voluntary resignations at the end of the fiscal year as thedate of grant and over the vesting period as consideration for receiving goods orretirement benefit liability in order to calculate net defined benefit liabilities andservices in accordance with ASBJ Statement No. 8, Accounting Standard for

retirement benefit expenses.

share-based payment Stock options granted to nonemployees are accounted
for based on the fair value of either the stock option or the goods or serviceso. Allowance for Retirement Benefits to Executive Officers and Audit andreceived. In the consolidated balance sheet, the stock option is presented as a

Supervisory Board Members̶ The provisions are calculated as liabilities atstock acquisition right and are included as a separate component of equity until

100% of the amount that would be required if all executive officers and audit andexercised.

supervisory board members resigned as of each balance sheet date.
r. Income Taxes̶ The Companies provide for income taxes applicable to all items
p. Asset Retirement Obligations̶ An asset retirement obligation is recoded for a

included in the consolidated statement of income regardless of when such taxes

legal obligation imposed either by law or contract that results from the acquisition,

are payable. Deferred income taxes are recorded to reflect the impact of temporary

construction, development, and the normal operation of a tangible fixed asset anddifferences between assets and liabilities recognized for financial reportingis associated with the retirement of such tangible fixed asset.

purposes and such amounts recognized for tax purposes. These deferred taxes
are measured by applying current income tax rates to the temporary differences.

The asset retirement obligation is recognized as the sum of the discounted cash
flows required for future asset retirement and is recorded in the period in which

The Company and certain consolidated subsidiaries applied for approval for thethe obligation is incurred if a reasonable estimate can be made. If a reasonableconsolidated taxation system during the current fiscal year, and they expect toestimate of the asset retirement obligation cannot be made in the period theadopt the consolidated taxation system beginning from the following fiscal year.

asset retirement obligation is incurred, the liability should be recognized when

Therefore, the corresponding accounting for the current fiscal year assumesa reasonable estimate of asset retirement obligation can be made. Upon initialsuch adoption of the consolidated taxation system in accordance with Practical

recognition of a liability for an asset retirement obligation, asset retirement cost

Solution on Tentative Treatment of Tax Effect Accounting Under Consolidated

is capitalized by increasing the carrying amount of the related fixed asset by theTaxation System (Part 1) (ASBJ PITF No. 5; December 28, 2015) and Practicalamount of the liability. The asset retirement cost is subsequently allocated to

Solution on Tentative Treatment of Tax Effect Accounting Under Consolidated

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

Taxation System (Part 2) (ASBJ PITF No. 7; March 14, 2016).

the liability is accreted to its present value each period. Any subsequent revisions
to the timing or the amount of the original estimate of undiscounted cash flows are

s. Foreign Currency Financial Statements ̶ The balance sheet accounts ofreflected as an adjustment to the carrying amount of the liability and the capitalized

associated companies denominated in foreign currencies are translated intoamount of the related asset retirement cost.

Japanese yen at the current exchange rate as of the balance sheet date,
except for equity, which is translated at the historical rate. Differences arisingq. Stock Options̶ Compensation expenses for employee stock options which werefrom such translation are shown as Foreign currency translation adjustments

granted on and after May 1, 2006 are recognized based on the fair value at theand Noncontrolling interests in separate components of equity. Revenue andLawson, Inc. MD&A 201930

expense accounts of affiliated companies denominated in foreign currencies are

The Companyʼs foreign consolidated subsidiaries have applied Internationaltranslated into yen at the current exchange rate.

Financial Reporting Standard 15 (IFRS 15), Revenue from Contracts with
Customers”, from the fiscal year ended February 28, 2019.

t. Per Share Information̶ Basic net income per share is computed by dividing net

income available to common shareholders by the weighted-average number of

The impact of the application of IFRS 15 on the Companyʼs consolidated
financial statements is immaterial.

common shares outstanding for the period.
(2) Changes in presentation
The number of shares used in computing net income per share was 100,057

When the presentation of financial statements is changed, prior-period financial

thousand shares for 2019 and 100,044 thousand shares for 2018.

statements are reclassified in accordance with the new presentation.

Diluted net income per share for the years ended February 28, 2019 and 2018
was computed by using the weighted-average number of common shares(3) Changes in accounting estimates
A change in an accounting estimate is accounted for in the period of

outstanding adjusted to include the potentially dilutive effect of stock options thatthe change if the change affects that period only, and is accounted for

were outstanding during the year.

prospectively if the change affects both the period of the change and future
periods.

Cash dividends per share presented in the accompanying consolidated statementof income are dividends applicable to the respective years including dividends to(4) Corrections of prior-period errors
When an error in prior-period financial statements is discovered, thosebe paid after the end of the year.

statements are restated.
u. Accounting Changes and Error Corrections̶ In December 2009, the ASBJ

issued ASBJ Statement No. 24, Accounting Standard for Accounting Changes
and Error Corrections”, and ASBJ Guidance No. 24,

v. Reclassification of Prior Year s Consolidated Financial Statements ̶ The

Guidance on Accounting

Company has made changes to the classification of amounts in the consolidated

Standard for Accounting Changes and Error Corrections”. Accounting treatments

statement of cash flows for the year ended February 28, 2019. In order to conform

under this standard and guidance are as follows:

to the presentation for the year ended February 28, 2019, the Company has
reclassified the related amounts in the consolidated statement of cash flows for the(1) Changes in accounting policies

year ended February 28, 2018, as stated below.

When a new accounting policy is applied following the revision of an
accounting standard, the new policy is applied retrospectively unless therevised accounting standard includes specific transitional provisions, in whichcase the entity shall comply with the specific transitional provisions.

w. New Accounting Pronouncements

Tax Effect Accounting
On February 16, 2018, the ASBJ issued ASBJ Statement No. 28,

PartialAmendments to Accounting Standard for Tax Effect Accounting, and ASBJ
31

Lawson, Inc. MD&A 2019

Financial Section

Guidance No. 26, Implementation Guidance on Recoverability of Deferred Tax

the effects of applying the accounting standard and guidance in future applicable

Assets. Accounting treatments are required as follows: (1) changes in handling

periods.

future taxable amounts in individual financial statements and (2) clarification ofhandling on recoverability of deferred tax assets in companies that are categorized

Leasesas type 1.

IFRS16, “Leases”, requires lessees to recognize most leases on the balance sheet,
thereby resulting in the recognition of lease assets and liabilities. The consolidated

The Company expects to apply the accounting standard and guidance for annual

foreign subsidiaries expect to apply IFRS 16 for annual periods beginning on or

periods beginning on or after March 1, 2019, and is in the process of measuring

after March 1, 2019.

the effects of applying the accounting standard and guidance in future applicable
periods.

The Company expects to apply the accounting standard and guidance for annual
periods beginning on or after March 1, 2019, and is in the process of measuring

Accounting Standard for Revenue Recognition

the effects of applying the accounting standard and guidance in future applicable

On March 30, 2018, the ASBJ issued ASBJ Statement No. 29, "Accounting

periods.

Standard for Revenue Recognition," and ASBJ Guidance No. 30, "Implementation
Guidance on Accounting Standard for Revenue Recognition. " The core principle

x. Changes in Presentation of Financial Statementsof the standard and guidance is that an entity should recognize revenue to depict(Consolidated Statement of Cash Flows)

the transfer of promised goods or services to customers in an amount that reflects

In the Cash flows from investing activities section, Purchase of investment

the consideration to which the entity expects to be entitled in exchange for thosesecurities was included in Other in the previous fiscal year. Due to an increase

goods or services. An entity should recognize revenue in accordance with thatin financial materiality,

core principle by applying the following steps:

presented. To reflect this change in method of presentation, the consolidated

Purchase of investment securities is now separately

financial statements for the previous fiscal year have been reclassified.
Step 1: Identify the contracts with a customer

As a result, in the Cash flows from investing activities section, (1,126) million yen

Step 2: Identify the performance obligations in the contractthat was presented as Other in the Consolidated Statement of Cash Flows for

Step 3: Determine the transaction pricethe previous fiscal year is now presented as Purchase of investment securities.

Step 4: Allocate the transaction price to the performance obligations in thecontract
Step 5: Recognize revenue when or as the entity satisfies a performanceobligation

In the Cash flows from investing activities section, Proceeds from sales ofinvestment securities was included in Other in the previous fiscal year. Due toan increase in financial materiality, Proceeds from sales of investment securities
is now separately presented. To reflect this change in method of presentation,

The Company expects to apply the accounting standard and guidance for annual

the consolidated financial statements for the previous fiscal year have been

periods beginning on or after March 1, 2022, and is in the process of measuring

reclassified.
Lawson, Inc. MD&A 201932

As a result, in the Cash flows from investing activities section, 665 million yen

3 ACCOUNTS RECEIVABLE̶DUE FROM FRANCHISED STORES

that was presented as Other in the Consolidated Statement of Cash Flows for

Under the franchise agreements, the Company is responsible for providing

the previous fiscal year is now presented as Proceeds from sales of investment

architectural and design services with respect to the franchised stores facilities, forsecurities.

training of the franchisees personnel, and for the centralized processing of invoicesfrom suggested vendors of merchandise and subsequent payments of amounts

In the Cash flows from investing activities section, Increase in long-term loans
receivable andpayable to such vendors.

Collection of long-term loans receivable were included in

Increase in long-term loans receivable - net in the previous fiscal year. In order to

The EDP system of the Company generates a record of merchandise purchased byenhance the clarity of the consolidated financial statements from the current fiscal

each franchised store and accumulates the amounts payable to respective vendors.

year, Increase in long-term loans receivable and Collection of long-term loans

Under the franchise agreements, the Company, as a representative for all franchised

receivable are now separately presented.

stores, pays amounts payable to the vendors on the stores behalf. When the

As a result, in the Cash flow from investing activities section, (3,447) million

merchandise is received by each franchised store, the Company records the cost of

yen that was presented as

Increase in long-term loans receivable – net in

the merchandise in the Accounts receivable ̶ Due from franchised stores accountthe Consolidated Statement of Cash Flows for the previous fiscal year is now

since such costs shall be subsequently recovered from the respective franchisedpresented as (8,580) million yen of Increase in long-term loans receivable andstores.

5,133 million yen of Proceeds from collection of long-term loans receivable.
The
In the Cash flows from investing activities section, Payments for guarantee
deposits and Proceeds from collection of guarantee deposits were includedin

Other in the previous fiscal year. In order to enhance the clarity of theconsolidated financial statements from the current fiscal year,

Payments forguarantee deposits and Proceeds from collection of guarantee deposits arenow separately presented.
As a result, in the Cash flows from investing activities section, (2,464) million
yen that was presented as Other in the Consolidated Statement of Cash Flowsfor the previous fiscal year is now presented as (24,579) million yen of Payments
for guarantee deposits and 22,115 million yen of Proceeds from collection ofguarantee deposits.

33

Lawson, Inc. MD&A 2019

Accounts receivable ̶ Due from franchised stores account represents net

amounts recoverable from the franchised stores.

Financial Section

4 LEASES

5 MARKETABLE AND INVESTMENT SECURITIESAs lessee:

Marketable and investment securities as of February 28, 2019 and 2018, consisted of

Finance lease transactions that do not transfer ownership.

the following:(1) Components of leassed assets

Thousands of
U.S. Dollars

Millions of Yen

The Companies lease certain store facilities and other assets.
(2) Accounting method for depreciation of leased assets

2019

The accounting method for depreciation of leased assets is as described in 2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, ( j) Property and Store
Equipment”

Non-current
̶Marketable and other equity securities¥13,342

Non-current̶Corporate bonds
Total

2019

2018

$120,339¥13,183

207

193

1,867

¥13,549¥13,376$122,206

As lessor:
Lease receivables as of February 28, 2019 and 2018, are summarized as follows:
Thousands of
U.S. Dollars

Millions of Yen

2019
Lease fee receivable
Interest income equivalents
Lease receivables

The costs and aggregate fair values of marketable and investment securities as ofFebruary 28, 2019 and 2018, were as follows:
Millions of Yen

2019

2018

¥19,608¥16,646$176,856

(488)

(220)

(5,016)¥19,120¥16,426$171,840

February 28, 2019

Securities classified as available-for-sale̶Equity securities

Cost¥6,796

Maturities of lease receivables for finance leases deemed to transfer leased property to
February 28, 2018

Thousands of
U.S. Dollars

Millions of Yen

Securities classified as available-for-sale̶Equity securities

Cost¥8,8662020¥2,673$24,109

2021

2,459

22,179

2022

2,181

19,672

2023

1,979

17,850

2024

1,662

14,991February 28, 2019

Cost

2025 and thereafter

8,653

78,046¥19,608$176,856

Securities classified as available-for-sale̶Equity securities$61,297

Total

Unrealized
Losses¥4,383

¥17

Fair
Value
¥11,162

Millions of Yen

the lessee at February 28, 2019 are as follows:Year Ending
February 28 or 29

Unrealized
Gains

Unrealized
Gains

Unrealized
Losses¥3,724

¥894

Fair
Value
¥11,696

Thousands of U.S. Dollars
Unrealized
Gains

Unrealized
Losses$39,532

$153

Fair
Value
$100,676

Lawson, Inc. MD&A 201934

The proceeds, realized gains, and realized losses on the available-for-sale securities
which were sold during the years ended February 28, 2019 and 2018, were as follows:

Available-for-sale:
Equity securities

Realized
Gains

Proceeds¥7,156

Realized
LossesAvailable-for-sale:
Equity securities

Realized
Gains

Proceeds

lived assets has declined, primarily as a result of continuous operating losses. The
carrying amounts of those assets are written down to the recoverable amounts andan impairment loss is recorded in other expenses in the consolidated statement of¥738

income.
The Companies recognized an impairment loss in the following asset categories for theMillions of Yen
February 28, 2018

The Companies mainly identify individual stores as the smallest cash generating
units. The Companies recognize an impairment loss in cases where the value of long-

Millions of Yen
February 28, 2019

6 LONG LIVED ASSETS

Realized
Lossesyears ended February 28, 2019 and 2018:¥665

Available-for-sale:
Equity securities

Proceeds$64,544

Realized
Gains

Realized
LossesLawson, Inc. MD&A 2019

2019

2018

Related Assets

Location

StoresBuildings andFurniture, fixtures,and equipment

Tokyo¥1,591¥1,306$14,350

Osaka

1,505

1,390

13,575

Others

10,241

8,721

92,369Other$6,656

Land

51

70

460

Software

503

6,035

4,537

Goodwill
Total

35

2019

Category

Thousands of U.S. Dollars
February 28, 2019

Thousands of
U.S. Dollars

Millions of Yen

1

12

9

¥13,892¥17,534$125,300

Financial Section

The above noted assets which incurred impairment losses for the years ended
February 28, 2019 and 2018, consisted of the following:

The balances of

Buildings

stores. The Company centralizes all merchandise purchasing procedures both for theCompany-operated stores and franchised stores and makes collective payments to

2019

2018

¥7,981¥5,968$71,985

587

811

5,294

4,693

4,485

42,329

Land

51

183

460

Software

503

6,035

4,537

Goodwill

1

12

9

Other

76

40

686

Total

¥13,892¥17,534$125,300

Furniture, fixtures, and equipment
Lease assets

Accounts payable ̶ trade represent the amounts payable tovendors for merchandise purchased by the Company-operated stores and franchised

Thousands of
U.S. Dollars

Millions of Yen

2019

8 ACCOUNTS PAYABLE̶TRADE

The recoverable amount of these assets was measured based on net selling priceor value in use. The net selling price of land was calculated based on the appraisedvalue by a real estate appraiser or the expected contract price. The value in use wasvendors (see Note 3).
Accounts payable̶trade as of February 28, 2019 and 2018, were summarized
below:
Thousands of
U.S. Dollars

Millions of Yen

2019
Accounts payable̶trade for franchised stores
Accounts payable̶trade for the Company-operated stores
Total

2018

2019

¥104,274¥101,116$940,507

19,135

17,059172,589¥123,409¥118,175$1,113,096

calculated by discounting estimated future cash flows. The discount rates used weremainly 3.6% and 4.4% for the years ended February 28, 2019 and 2018.

9 ACCOUNTS PAYABLE̶DUE TO FRANCHISED STORESThe cost of merchandise supplied to franchised stores is recorded as Accounts

7 LAND REVALUATION

receivable̶Due from franchised stores as described in Note 3.

Under the Law of Land Revaluation, promulgated on March 31, 1998, and revised on
March 31, 1999 and 2001, the Company opted for a one-time revaluation of its own-use

All franchised stores make remittances of cash proceeds from daily sales to theland to a value based on real estate appraisal information as of February 28, 2002.

Company. In certain instances, the remittance from a franchised store exceeds thebalance of Accounts receivable̶Due from franchised stores. In the accompanying

The resulting land revaluation difference represents unrealized depreciation of land andconsolidated balance sheets, such excess balances are presented as

is stated, net of income taxes, as a component of equity. There was no effect on thepayable̶Due to franchised stores.

Accounts

consolidated statement of income. Continuous readjustment is not permitted unlessthe land value subsequently declines significantly.
As at February 28, 2019, the carrying amount of the land after the above one-timerevaluation exceeded the market value by ¥151 million ($1,362 thousand).
Lawson, Inc. MD&A 201936

10 SHORT-TERM LOANS AND LONG TERM DEBT

The aggregate annual maturities of finance lease obligations at February 28, 2019,

Short-term loans at February 28, 2019 and 2018, consisted of notes to banks.

were as follows:

The annual interest rates applicable to the short-term loans were 0.12% and 0.06 % at

Year Ending February 28 or 29

February 28, 2019 and February 28, 2018, respectively.

2020¥38,750$349,509

2021

34,909314,864

2022

29,923269,8932023

26,356

237,720

Long-term debt at February 28, 2019 and 2018, consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

2019

2018

2019

Loans from banks and financial company,
due serially to 2023 with a weighted-averageinterest rate of 0.21% (2019)¥310,000¥56,045$2,796,067

Obligations under finance leases

170,192

146,681

1,535,059

Less current portion(88,750)(33,639)(800,487)¥391,441¥169,087$3,530,639

Long-term debt, less current portion

Thousands of
U.S. Dollars

Millions of Yen

2024 and thereafter
Total

40,254363,073¥170,192$1,535,059

The Company and certain consolidated subsidiaries have entered into loan commitment
agreements to efficiently finance working capital.
The balances of unused loans at February 28, 2019 and 2018, consisted of thefollowing:Thousands of
U.S. Dollars

Millions of Yen

The aggregate annual maturities of long-term debt, excluding finance leases, atFebruary 28, 2019, were as follows:Year Ending February 28 or 29

2020

Thousands of
U.S. Dollars

Millions of Yen
50,000450,978

180,000

1,623,523

2021
2022
2023
2024 and thereafter
Total

37

Lawson, Inc. MD&A 20192019
Total loan commitments

80,000721,566¥310,000$2,796,067

Outstanding balance of used loans
Net amount¥220,0002018$1,984,306¥91,000$1,264,544

79,800¥140,2002019¥91,000

719,762

Financial Section

11 EMPLOYEES RETIREMENT BENEFITS(2) Changes in plan assets for the year ended February 28, 2019, were as follows:

For employeesʼ retirement benefits, the Company and certain consolidated subsidiaries
adopt a funded or unfunded defined benefit-type lump-sum retirement allowance plan
and a defined contribution-type pension plan.

Balance at beginning of year

The lump-sum retirement allowance plan (generally unfunded, with some plans

Balance at end of year

Actuarial gains

Millions of Yen

Thousands of
U.S. Dollars¥5,587$50,392(5)(45)¥5,582$50,347

being funded in accordance with an employee pension trust) pays a lump sum as aretirement benefit based on salary and length of service of the employee.

(3) Reconciliation between the liability recorded in the consolidated balance sheet andthe balances of defined benefit obligations and plan assets were as follows:

The lump-sum retirement allowance plan employed by some consolidated subsidiaries
calculates liabilities related to retirement benefits and retirement benefit expenses byFunded defined benefit obligation

the simplified method.

Plan assets

Year Ended February 28, 2019(1) Changes in defined benefit obligations for the year ended February 28, 2019, wereas follows:

Balance at beginning of year
Current service cost

Millions of Yen

Thousands of
U.S. Dollars¥19,091$172,193

1,820

16,416

Interest cost

64

577

Actuarial losses

357

3,220

Benefits paid

(1,015)(9,155)

OthersBalance at end of year

(1)

(9)

¥20,316$183,242

Millions of Yen

Thousands of
U.S. Dollars¥18,493$166,799(5,582)(50,347)

12,910116,452

Unfunded defined benefit obligation

1,823

16,433Net liability arising from defined benefit
obligations¥14,733$132,885

Millions of Yen

Thousands of
U.S. Dollars

Liability for retirement benefits¥14,733$132,885

Net liability arising from defined benefit
obligations¥14,733$132,885

Lawson, Inc. MD&A 201938

(4) Components of net periodic benefit costs for the year ended February 28, 2019,were as follows:a. Components of plan assets
Millions of Yen

Thousands of
U.S. Dollars

Service cost

¥1,820$16,416

Interest cost

64

577

Recognized actuarial losses

185

1,669

1

9

(31)

(280)

¥2,039$18,391

Amortization of prior service cost
OthersNet periodic benefit costs(7) Plan assets(5) Amounts recognized in other comprehensive income (before income tax effect) in

Plan assets consisted of the following:
Cash and cash equivalents

100%

Total

100%

b. Method of determining the expected rate of return on plan assets
The expected rate of return on plan assets is determined considering the longterm rates of return which are expected currently and in the future from thevarious components of the plan assets.
(8) Assumptions used for the year ended February 28, 2019, were set forth as follows:

respect to defined retirement benefit plans for the year ended February 28, 2019,

Discount rate

were as follows:

Expected rate of return on plan assets
Millions of Yen

Thousands of
U.S. Dollars

Prior service cost

¥1

$9

Actuarial losses(178)(1,605)

Total¥(177)$(1,596)

tax effect) in respect to defined retirement benefit plans as of February 28, 2019,were as follows:
Millions of Yen

Thousands of
U.S. Dollars

Unrecognized actuarial losses¥1,190$10,731

Total¥1,190$10,731

Unrecognized prior service cost

39

Lawson, Inc. MD&A 20190%(9) Contributions to the defined contribution pension plan for the year ended February
28, 2019, were as follows:
Millions of Yen

Net periodic benefit cost(6) Amounts recognized in accumulated other comprehensive income (before income

0.5% (mainly)¥526

Thousands of
U.S. Dollars$4,744

Financial Section

Year Ended February 28, 2018
Millions of Yen(1) Changes in defined benefit obligations for the year ended February 28, 2018, wereas follows:
Millions of Yen

Balance at beginning of year
Current service cost
Interest cost

¥18,417

Liability for retirement benefits¥13,504

Net liability arising from defined benefit obligation¥13,504(4) Components of net periodic benefit costs for the year ended February 28, 2018,
were as follows:

1,757
64

Millions of Yen

Actuarial losses(85)

Service cost

¥1,757

Benefits paid

(1,066)

Interest cost

64

Recognized actuarial losses

198

Amortization of prior service cost

10

Others(25)

OthersBalance at end of year

4
¥19,091(2) Changes in plan assets for the year ended February 28, 2018, were as follows:
Millions of Yen

Balance at beginning of year
Actuarial gains
Balance at end of year

¥5,5870

Net periodic benefit costs¥2,004(5) Amounts recognized in other comprehensive income (before income tax effect) in
respect to defined retirement benefit plans for the year ended February 28, 2018,
were as follows:¥5,587
Millions of Yen(3) Reconciliation between the liability recorded in the consolidated balance sheet andthe balances of defined benefit obligations and plan assets were as follows:

Prior service cost

¥10

Actuarial losses

284

Total

¥293

Millions of Yen

Funded defined benefit obligations
Plan assets¥17,434(5,587)
11,847

Unfunded defined benefit obligations
Net liability arising from defined benefit obligations

1,657¥13,504

Lawson, Inc. MD&A 201940

(6) Amounts recognized in accumulated other comprehensive income (before

12 ASSET RETIREMENT OBLIGATIONS

income tax effect) in respect to defined retirement benefit plans as of February 28,

The changes in asset retirement obligations for the years ended February 28, 20192018,were as follows:

and 2018, were as follows:
Millions of Yen

Unrecognized prior service cost

1,012

Total

¥1,013(7) Plan assets
a. Components of plan assets
Plan assets consisted of the following:
Cash and cash equivalents

100%

Total

100%

The expected rate of return on plan assets is determined considering the longterm rates of return which are expected currently and in the future from thevarious components of the plan assets.
(8) Assumptions used for the year ended February 28, 2018, were set forth as follows:
Expected rate of return on plan assets

0.5% (mainly)
0%(9) Contributions to the defined contribution pension plan for the year ended February
28, 2018, were as follows:
Millions of Yen

Net periodic benefit cost

41

Lawson, Inc. MD&A 2019

Balance at beginning of year

¥489

2019

2018

¥29,109¥27,023$262,551

2,385

2,493

21,511

Reconciliation associated withpassage of time

396

392

3,572

Reduction associated with settlementof asset retirement obligations

(772)

(799)

(6,963)

31,118

29,109280,671

(16)

(46)

(144)

¥31,102¥29,063$280,527

Additional provisions associated with theacquisition of property, plant,
and equipment

Total
Less current portion
Asset retirement obligations,less current portionb. Method of determining the expected rate of return on plan assets

Discount rate

2019

¥1

Unrecognized actuarial losses

Thousands of
U.S. Dollars

Millions of Yen

Financial Section

13 EQUITY

Under the Companies Act, the total amount of additional paid-in capital and legal

Japanese companies are subject to the Companies Act of Japan (the Companies

reserve may be reversed without limitation. The Companies Act also provides for

Act " ). The significant provisions in the Companies Act that affect financial andcommon stock, legal reserve, additional paid-in capital, other capital surplus, andaccounting matters are summarized below:

retained earnings to be transferred among the accounts within equity under certain
conditions upon resolution of the shareholders.

a. Dividends

Under the Companies Act, companies can pay dividends at any time during thec. Treasury Stock and Treasury Stock Acquisition Rights

fiscal year in addition to the year-end dividend upon resolution at the shareholdersʼ

The Companies Act also provides for companies to purchase treasury stock andmeeting. For companies that meet certain criteria such as (1) having a Board of

dispose of such treasury stock by resolution of the Board of Directors. The amount

Directors, (2) having independent auditors, (3) having an Audit & Supervisory Board,of treasury stock purchased cannot exceed the amount available for distribution toand (4) the term of service of the directors being prescribed as one year rather than

the shareholders, which is determined by a specific formula. Under the Companies

the normal two-year term by its articles of incorporation, the Board of Directors may

Act, stock acquisition rights are presented as a separate component of equity.

declare dividends (except for dividends in kind) at any time during the fiscal year if

The Companies Act also provides for companies to purchase both treasury stock

the company has prescribed so in its articles of incorporation.

acquisition rights and treasury stock. Such treasury stock acquisition rights arepresented as a separate component of equity or deducted directly from stock

The Companies Act permits companies to distribute dividends-in-kind (noncash

acquisition rights.

assets) to shareholders subject to a certain limitation and additional requirements.
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 the amount 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 a legal reserve (a component of retained earnings) or as additional
paid-in capital (a component of capital surplus) depending on the equity accountcharged upon the payment of such dividends until the total aggregate amountof legal reserve and additional paid-in capital equals 25% of the common stock.
Lawson, Inc. MD&A 201942

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, 2019, were as follows:
Persons Granted

Number of
Options Granted

Date of Grant

Exercise Price

5th Stock Option

9 directors

22,400 shares2005.10.12¥1($0.01)

From October 13, 2005 to May 31, 2025

6th (a) Stock Option

9 directors

21,300 shares2006.10.26¥1($0.01)

From October 27, 2006 to May 26, 2026

7th (a) Stock Option

7 directors

18,000 shares2007.9.5¥1($0.01)

From September 6, 2007 to August 20, 2027

8th (a) Stock Option

7 directors

26,400 shares2009.1.16¥1($0.01)

From January 17, 2009 to December 15, 2028

9th Stock Option

7 directors

21,500 shares2010.2.17¥1($0.01)

From February 18, 2010 to February 1, 2030

10th Stock Option

7 directors

18,900 shares2011.2.25¥1($0.01)

From February 26, 2011 to February 10, 2031

11th Stock Option

7 directors

27,000 shares2012.2.17¥1($0.01)

From February 18, 2012 to February 1, 2032

12th Stock Option

7 directors

26,900 shares2013.4.12¥1($0.01)

From April 12, 2013 to March 26, 2033

13th Stock Option

7 directors

25,400 shares2014.4.10¥1($0.01)

From April 10, 2014 to March 23, 2034

14th Stock Option

8 directors

12,400 shares2015.4.10¥1($0.01)

From April 10, 2015 to March 24, 2035

16th Stock Option

8 directors

15,100 shares2016.5.2¥1($0.01)

From May 2, 2016 to April 12, 2036

17th Stock Option

8 directors

20,100 shares2017.5.1¥1($0.01)

From May 1, 2017 to April 11, 2037

18th Stock Option

12 executive
officers

5,100 shares2017.7.21¥1($0.01)

From July 21, 2017 to July 4, 2037

19th Stock Option

7 director
9 executive
officers

14,700 shares2018.6.8¥1($0.01)

From June 8, 2018 to May 21, 2038

Stock Option

43

Lawson, Inc. MD&A 2019

Exercise Period

Financial Section

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
Option14th Stock
Option15th Stock
Option

1,600

3,700

4,100

5,800

2,100

2,300

6,600

7,000

6,300

11,400

1,100

6,500

5,300

7,200

1,100

500

1,000

1,000

1,300

1,100

1,300

1,300

1,100

2,700

3,100

4,500

1,000

1,000

5,300

500

1,000

4,200

500

2,700

3,100

4,500

1,000

1,000

5,300

500

1,000

4,200

2,300

2,700

3,900

500

500

500

500

400

400

600

500

500

4,800

500

1,000

¥1

¥1

¥1

¥1

¥1

¥1

¥1

¥1

¥1

¥1

($0.01)($0.01)($0.01)($0.01)($0.01)($0.01)($0.01)($0.01)($0.01)($0.01)

Year Ended February 28, 2018
Non-vested
February 28, 2017̶Outstanding
GrantedCanceled
VestedFebruary 28, 2018̶Outstanding
VestedFebruary 28, 2017̶Outstanding
VestedExercised
Canceled
February 28, 2018̶Outstanding
Year Ended February 28, 2019Non-vested
February 28, 2018̶Outstanding
GrantedCanceled
VestedFebruary 28, 2019̶Outstanding
VestedFebruary 28, 2018̶Outstanding
VestedExercised
Canceled
February 28, 2019̶Outstanding
Exercise price

500

Average stock price at exercise

3,700¥7,190($64.85)

Fair value price at grant date

¥3,178¥2,852¥3,477¥2,652¥2,689¥3,339¥5,516¥5,146¥6,251($28.66)($25.72)($31.36)($23.92)($24.57)($30.12)($49.75)($46.42)($56.38)

Lawson, Inc. MD&A 201944

Stock option activity is as follows:

The assumptions used to measure the fair value of the 19th stock options were as

16th Stock
OptionVestedFebruary 28, 2018̶Outstanding
VestedExercised
Canceled
February 28, 2019̶Outstanding
Exercise price
Average stock price at exercise
Fair value price at grant date45

Lawson, Inc. MD&A 201918th Stock
Option19th Stock
Optionfollows:
19th Stock Option

Year Ended February 28, 2018
Non-vested
February 28, 2017̶Outstanding
GrantedCanceled
VestedFebruary 28, 2018̶Outstanding
VestedFebruary 28, 2017̶Outstanding
VestedExercised
Canceled
February 28, 2018̶Outstanding
Year Ended February 28, 2019Non-vested
February 28, 2018̶Outstanding
GrantedCanceled
VestedFebruary 28, 2019̶Outstanding

17th Stock
Option20,100

5,100

20,1005,100

14,10020,100

5,100

8,800

11,400

400

5,500

8,700

4,700

14,70014,700

5,300

8,700

4,700

500

500

1,300

300

4,800

8,200

3,400

14,400

¥1

¥1

¥1

¥1

($0.01)($0.01)($0.01)($0.01)

14,700¥7,190¥7,190¥6,713¥6,670($64.85)($64.85)($60.55)($60.16)¥6,254¥5,343¥5,363¥4,833($56.41)($48.19)($48.37)($43.59)

Estimate method

Black-Scholes option
pricing model

Volatility of stock price22.90%

Estimated remaining outstanding period

10 years

Estimated dividend¥255.0 per share

Risk-free interest rate

0.06%

Financial Section

15 INCOME TAXESA reconciliation between the normal effective statutory tax rates and the actual effective

The Company and its domestic subsidiaries are subject to a number of different taxes

tax rates reflected in the accompanying consolidated statements of income for thebased on income, which in the aggregate, resulted in a normal statutory tax rate ofyears ended February 28, 2019 and 2018, is as follows:

approximately 30.9% for the years ended February 28, 2019 and 2018.

2019

2018

Normal effective statutory tax rate

30.9 %

30.9 %The tax effects of significant temporary differences and tax loss carryforwards, which

Change in valuation allowance

(2.5)

2.8

resulted in deferred tax assets and liabilities at February 28, 2019 and 2018, are as

Non-deductible permanent differencessuch as entertainment expenses

0.5

0.5

Non-taxable permanent differencessuch as dividend income

(2.3)

(0.4)

Per-capita inhabitant tax

1.0

0.8

Difference in tax rates of foreign
consolidated subsidiaries

1.5

1.3

Reduction of ending deferred tax balance
due to change in statutory tax rate

0.4

0.6

Amortization of goodwill

3.0

2.9

follows:
Thousands of
U.S. Dollars

Millions of Yen

2019

2019

2018

Deferred tax assets:
Accrued enterprise taxes¥1,114¥787$10,048

Accrued employees bonuses

1,343

1,187

12,113

Excess of depreciation

9,724

10,77187,706

529

374

4,771

Employees retirement benefits

6,400

5,967

57,725

Allowance for doubtful accounts

283

348

2,553

Excess of amortization of software

Impairment losses

10,466

6,017

94,399Tax loss carryforwards

7,984

9,172

72,012

Other

6,221

6,407

56,112(10,759)(12,784)(97,042)

33,30528,246300,397

Trademark rights

2,861

3,046

25,805Net deferred tax assets¥30,444¥25,200$274,592

Less valuation allowance
Total
Deferred tax liabilities:

Other-net

3.4

(1.0)

Actual effective tax rate

35.9 %

38.4 %In the section above, Non-taxable permanent differences such as dividend income
was included in Other in the previous fiscal year. Due to an increase in financial
materiality, Non-taxable permanent differences such as dividend income is now
separately presented. To reflect this change in method of presentation, the section forthe previous fiscal year has been reclassified.
As a result, in the note, (1.4) percent that was presented as Other-net in the note forthe previous fiscal year is now presented as (0.4) percent of Non-taxable permanentdifferences such as dividend income and (1.0) percent of Other-net.

Lawson, Inc. MD&A 201946

At February 28, 2019, certain domestic subsidiaries has tax loss carryforwards

17 OTHER COMPREHENSIVE INCOME

aggregating approximately ¥30,898 million ($3,424,661 thousand) which are available

The components of other comprehensive income for the years ended February 28,

to be offset against taxable income of such subsidiaries in future years. These tax loss

2019 and 2018, were as follows:

carryforwards, if not utilized, will expire as follows:Year Ending
February 28 or 29

Millions of Yen

Thousands of
U.S. Dollars

2019¥5,452$604,463

2020

10,2301,134,200

2021

2,625

291,034

Reclassification adjustments to profit or loss

(676)

31

(6,097)

2,599

16,217

2019

2019

2018

Unrealized gain on available-for-sale securities
Gains arising during the year

¥2,474¥2,568$22,314

2022

4,412

489,158

Amount before income tax effect

1,798

2023

4,540

503,350

Income tax effect

(533)

(789)

(4,807)

2024

1,361

150,894

Total

1,265

1,810

$11,410Foreign currency translation adjustments

2025

661

73,285

2026

1,284

142,3572027

333

36,920Total¥30,898$3,425,661

Adjustments arising during the year

(674)

36

(6,079)(¥674)¥36($6,079)(¥177)¥86($1,596)

Reclassification adjustments toprofit or loss

202

207

1,821

Amount before income tax effect

25

293

225

Total
Remeasurements of defined benefit plans
Gains (losses) arising during the year

16 SUPPLEMENTAL CASH FLOW INFORMATION(1) Finance lease assets and finance lease obligations regarded as non-cash

Income tax effect

(6)

(92)

(54)

transactions incurred for the year ended February 28, 2019, amounted to ¥58,842

Total

¥19

¥201

$171

million ($530,730 thousand).

Total other comprehensive income¥610¥2,047$5,502(2) Asset retirement obligations regarded as non-cash transactions incurred for the year
ended February 28, 2019, amounted to ¥2,385 million ($21,512 thousand).

47

Thousands of
U.S. Dollars

Millions of Yen

Lawson, Inc. MD&A 2019

Financial Section

18 SEGMENT INFORMATION

Lawson Urbanworks, Inc. undertakes company-owned LAWSON stores mainly
Accounting Standard

in Tokyo and Chiba prefectures. Lawson Store100, Inc. undertakes company-for Disclosures about Segments of an Enterprise and Related Information” , andowned LAWSON STORE100 stores. SCI, Inc., a functional subsidiary whichissued ASBJ Guidance No. 20, Guidance on Accounting Standard for Disclosurescomprehensively manages the process from procurement to sale, aims to improveabout Segments of an Enterprise and Related Information. Under the standard andthe efficiency of the entire process.

In March 2008, the ASBJ revised ASBJ Statement No.17,

guidance, an entity is required to report financial and descriptive information about its
reportable segments. Reportable segments are operating segments or aggregations ofRegarding the Seijo Ishii Business, SEIJO ISHII CO., LTD. operates SEIJO ISHII

operating segments that meet specified criteria. Operating segments are components

supermarkets.

of an entity about which separate financial information is available and for which such

Regarding the Entertainment-related Business, Lawson Entertainment, Inc.

information is evaluated regularly by the chief operating decision-maker in deciding how

conducts the management and sales of concert tickets at LAWSON stores andto allocate resources and in assessing performance. Generally, segment information isothers, music and video software products at HMV stores and others. In addition,required to be reported on the same basis as is used internally for evaluating operating

United Cinemas Co., Ltd. operates multiplex movie theatres.

segment performance and deciding how to allocate resources to operating segments.
Regarding the Financial Services Business, Lawson Bank, Inc. carries out a banking(a) Description of reportable segments

business.

The Companyʼs financial information is provided separately by reportable segment

Due to its increased importance, the Financial Services Business, which was

and is subject to regular review by the Board of Directors with regard to theincluded in “Other”, has been classified as a separate reporting segment from theallocation of managerial resources and performance evaluation.

current fiscal year. Segment information for the previous fiscal year stated in (c)The Group operates primary businesses Domestic Convenience Store Business,

Information about sales, profit (loss), assets, and other items is as follows reflects

Seijo Ishii Business, Entertainment-related Business and Financial Services Businessthis change in segment classification.

while incorporating other related businesses.
(b) Methods of measurement for the amounts of sales, profit , assets, and other items
Therefore, the Group has made the Domestic Convenience Store Business, Seijo

for each reportable segment

Ishii Business, Entertainment-related Business and Financial Services Business units
its main reportable segments, based on consideration of financial characteristics

The segment accounting policies are the same as those described in “Accounting

and the nature of the services provided.

Policies for the Preparation of Consolidated Financial Statements. Segment profit
is based on operating income. Intersegment sales or transfers are based on market

Regarding the Domestic Convenience Store Business, Lawson, Inc. operates avalues.

franchise system as well as undertaking company-owned stores in Japan as theparent company of LAWSON, NATURAL LAWSON, and LAWSON STORE100.
Lawson Sanin, Inc. undertakes company-owned LAWSON stores in the Sanin area.
Lawson, Inc. MD&A 201948

(c) Information about sales, profit (loss), assets, and other items is as follows:
Millions of Yen

2019
Reportable Segments
Domestic
Convenience
Store Business

Seijo Ishii
Business

Entertainment-Related
Business

Financial
Services
Business

Other

Total

¥462,633¥86,672¥76,662¥30,356¥44,325¥700,648

1,409

217

1,079

8,765

¥(8,765)¥(8,765)

Reconciliations

Consolidated

Sales:
Sales to external customers
Intersegment sales or transfers

6,060¥700,648

Total¥468,693¥86,672¥78,071¥30,573¥45,404¥709,413

Segment profit (loss)¥48,263¥7,414¥4,500¥2,224¥(1,619)¥60,782

Segment assets

893,711

66,42170,354386,267

25,237

1,441,990

Depreciation

52,266

1,844

2,245

4,594

1,480

62,42962,429Amortization of goodwill

2,417

1,437

502

59

4,415

4,415

Investments in associated companies

5,009

5,009

5,009

Increase in property, plant, and equipment and intangible assets

47,106

61,344

61,344¥700,648¥60,782¥(99,500)

1,342,490

Other:

688

1,332

8,494

3,724

Millions of Yen

2018
Reportable Segments
Domestic
Convenience
Store Business

Seijo Ishii
Business

EntertainmentRelated
Business

Financial
Services
Business

Other

Total

¥437,216¥81,957¥73,967¥27,187¥36,998¥657,325

1,414

155

1,104

8,140

¥(8,140)¥(8,140)

Reconciliations

Consolidated

Sales:
Sales to external customers
Intersegment sales or transfers

5,468¥657,325

Total¥442,684¥81,957¥75,381¥27,341¥38,102¥665,465

Segment profit (loss)¥53,648¥6,854¥3,854¥4,276¥(2,811)¥65,821

Segment assets

834,644

60,45863,84650,43320,0891,029,470

Depreciation

46,162

1,799

2,300

3,170

1,333

54,76454,764

Amortization of goodwill

1,839

1,437

502

60

3,838

3,838

Investments in associated companies

5,146

5,146

5,146

Increase in property, plant, and equipment and intangible assets

49,15660,07160,071¥657,325¥65,821¥(129,214)

900,256

Other:

49

Lawson, Inc. MD&A 2019

1,061

1,242

5,946

2,666

Financial Section

Thousands of U.S. Dollars

2019
Reportable Segments
Domestic
Convenience
Store Business

Seijo Ishii
Business

Entertainment
relatedBusiness

Financial
Services
Business

Other$273,798$399,793

Total

Reconciliations

Consolidated

Sales:
Sales to external customers$781,744$691,458
12,709

1,957

9,732

79,056$(79,056)$4,227,410$781,744$704,167$275,755$409,525$6,398,601$(79,056)

Segment profit (loss)$435,312$66,871$40,588$20,060$(14,603)$548,228

Segment assets

8,060,891

599,089

634,5633,483,963

227,627

13,006,133

Depreciation

471,417

16,632

20,24941,436

13,349563,083

563,083

Amortization of goodwill

21,80012,961

4,528

532

39,821

39,82145,17945,1796,205

12,01430,590553,297553,297

Intersegment sales or transfers
Total$4,172,752
54,658$6,319,545$6,319,545$6,319,545$548,227$(897,447)

12,108,686

Other:

Investments in associated companies

45,179

Increase in property, plant, and equipment and intangible assets

424,876

76,612

Notes: 1. The business segments within the Other category that do not fall under the main reportable segments, include Overseas Business operated by Shanghai Lawson, Inc. andothers.
2. Adjustments to segment assets are due to the elimination of intra-segment transactions.
3. Segment profit (loss) corresponds to consolidated operating income.

Lawson, Inc. MD&A 201950

(d) Information regarding loss on impairment of long-lived assets of reportable segments
Millions of Yen

2019
Reportable Segments
Domestic
Convenience
Store Business

Loss on impairment of long-lived assets

Seijo Ishii
Business

EntertainmentRelated
Business¥13,274

Financial
Services
Business

Other

¥50

¥567

Total

Reconciliations¥13,892

Consolidated¥13,892

Millions of Yen

2018
Reportable Segments
Domestic
Convenience
Store Business

Loss on impairment of long-lived assets¥16,854

Seijo Ishii
Business¥88

EntertainmentRelated
Business

Financial
Services
Business

Other

¥150

¥442

Total

Reconciliations¥17,534

Consolidated¥17,534

Thousands of U.S. Dollars

2019
Reportable Segments
Domestic
Convenience
Store Business

Loss on impairment of long-lived assets

51

Lawson, Inc. MD&A 2019

$119,726

Seijo Ishii
Business

EntertainmentRelated
Business$451

Financial
Services
Business

Other$5,123

Total$125,300

Reconciliations

Consolidated$125,300

Financial Section(e) Information regarding the carrying amount of goodwill by reportable segments
Millions of Yen

2019
Reportable Segments

Goodwill at February 28, 2019

Domestic
Convenience
Store Business

Seijo Ishii
Business¥16,096¥22,396

EntertainmentRelated
Business

Financial
Services
Business

Other¥7,687

¥655

Total

Reconciliations¥46,837

Consolidated¥46,836

Millions of Yen

2018
Reportable Segments

Goodwill at February 28, 2018

Domestic
Convenience
Store Business

Seijo Ishii
Business¥15,160¥23,833

EntertainmentRelated
Business

Financial
Services
Business

Other¥8,188

¥766

Total

Reconciliations¥47,947

Consolidated¥47,947

Thousands of U.S. Dollars

2019
Reportable Segments

Goodwill at February 28, 2019

Domestic
Convenience
Store Business

Seijo Ishii
Business

EntertainmentRelated
Business$145,197$202,002$69,333

Financial
Services
Business

Other$5,909

Total$422,441

Reconciliations

Consolidated$422,441

The amount under Other is attributable to the overseas business.

Lawson, Inc. MD&A 201952

19 RELATED PARTY TRANSACTIONS(2) Transactions between subsidiaries and related parties

Balances and transactions of the Company with a subsidiary of Mitsubishi Corporation
as of and for the years ended February 28, 2019 and 2018, were as follows:

2019

Thousands of
U.S. Dollars

Millions of Yen

Payment of guarantee fees

2018

2019

¥9,800$88,39200

Mitsubishi Shokuhin Co., Ltd.
Accounts payable̶trade¥59,898¥57,253$540,254

Purchases

754,005

707,8026,800,803

Mitsubishi Corporation Financial &Management Services (Japan) Ltd.
Short-term loans payable
Accrued interest¥9,800$88,392

1

9

Purchase prices and other conditions are determined on an arm s-length basis.

53

Lawson, Inc. MD&A 20192019

Acceptance of debt guarantees
Payment of guarantee fees

¥200,000$1,803,914

8

72¥70,000$631,370

29

262¥130,000$1,172,544

79

713

Mitsubishi Corporation Financial &Management Services (Japan) Ltd.

Mitsubishi Corporation
Acceptance of debt guarantees

2018

Mitsubishi Corporation(1) Transactions between the Company and related parties

2019

Thousands of
U.S. Dollars

Millions of Yen

Short-term loans payable
Accrued interest
Long-term loans payable
Accrued interest
Mitsubishi Shokuhin Co., Ltd.:
Accounts receivable̶Other¥29,243¥14,466$263,759

Sales of processed food, etc.

184,481

143,626

1,663,940

Sales prices and other conditions are determined on an arm s-length basis.

Financial Section

20 FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES

purpose of funding a banking business and M&A, and are due within five years.

(1) Policy for Financial Instruments
The Company primarily uses short-term deposits, etc., to manage its funds and

The primary purpose of lease obligations related to finance lease transactions israises funds as necessary through borrowings from financial institutions and leasing,securing the funds required for capital investments, and the maximum redemption

according to the financing plan.

period is 15 years after the consolidated balance sheet date.

(2) Nature, Extent of Risk, and Risk Management System for Financial Instruments

With regard to the liquidity risk associated with fundraising (risk that payments

Trade receivables, such as accounts receivable due from franchised stores,

cannot be executed on the payment due dates), the Company prepares andaccounts receivable-other, and lease receivables are exposed to credit risk fromupdates financial plans on a timely basis and manages liquidity risk by measuresbusiness counterparties.

including maintaining adequate liquidity on hand.

Long-term loans receivable (mainly construction assistance fund receivables(3) Fair Values of Financial Instruments

and loans to franchised stores) and lease deposits are exposed to credit risks ofFair values of financial instruments are based on quoted prices in active markets. If

borrowers and landlords. With regard to this risk, the Company manages credit

a quoted price is not available, other rational valuation techniques are used instead.

on a daily basis at the relevant division and aims to identify and minimize collection

Since multiple factors are considered in the estimation of fair value, the results ofconcerns in the early stages arising from the deterioration in the financial condition

the estimation might differ if other valuation techniques were used.

of those borrowers and landlords.

Millions of Yen
Carrying
AmountFair Value

Investment securities are primarily shares of companies with which the Company

February 28, 2019has business relationships and listed shares which are exposed to the risk of market

Due from franchised stores

price fluctuation. With regard to this risk, the Company monitors the financial

Lease receivables

19,12018,322

Accounts receivable

120,852

120,852

Long-term loans receivable

43,96543,903

Investment securities

11,162

11,162conditions of business counterparties on a regular basis.
For trade payables, most of the accounts payable-trade, accounts payable due to franchised
stores, accounts payable-other, and deposits received as a result of bill settlement services
have payment due dates within one month, while most deposits received held as a result ofticket sales transactions have payment due dates within six months.
Short-term loans payable are mainly for the purpose of procuring working capital,
and are due within 1 year.
Long-term loans from banks and financial company payable are mainly for the¥47,180

Unrealized
Gain/Loss¥47,180¥ (798)(62)

Lease deposits

106,668

106,867

199

Total

¥348,948¥348,287(661)

Accounts payable¥225,405¥225,405

Short-term loans

126,600

126,600

Deposits received

131,805

131,805

Long-term debt(including current portion of long-term debt)

480,192

474,421¥(5,771)

Total¥964,002¥958,231¥(5,772)

Lawson, Inc. MD&A 201954

Due from franchised stores and accounts receivables

Millions of Yen
February 28, 2018

Carrying
AmountFair Value

Unrealized
Gain/Loss

Due from franchised stores¥46,599¥46,599

Lease receivables

16,426

15,550Accounts receivable

82,60582,605Long-term loans receivable

47,36647,351

Investment securities

11,696

11,696

Lease deposits

100,210

99,659

(551)

Total

¥304,903¥303,460(1,443)

Accounts payable¥178,616¥178,616

Deposits received

109,629

109,629

Long-term debt(including current portion of long-term debt)

202,726

197,678¥(5,048)

Total¥490,971¥485,923¥(5,048)

allowance for doubtful accounts) approximate fair value because of their shortmaturities.

¥(876)

Lease receivables(15)

The fair values of lease receivables are determined by discounting future cash flows,which reflect collectability, using the yield rate of government bonds for the remaining
period.
Long-term loans receivable
The fair values of long-term loans receivable (including allowance for doubtful
accounts) are determined by discounting the cash flows related to the obligations at
the Companies assumed corporate discount rate.
Investment securities

Thousands of U.S. Dollars

55

The carrying values of Due from franchised stores and accounts receivable (including

February 28, 2019

Carrying
AmountDue from franchised stores$425,543$425,543

Lease receivables

172,404

165,257

Accounts receivable

1,090,033

1,090,033

Long-term loans receivable

396,546

395,986

Investment securities

100,676

100,676

Lease deposits

962,100

963,895

1,795

Total

$3,147,352$3,141,390$(5,963)

Accounts payable$2,033,056$2,033,056

Short-term loans

1,141,878

1,141,878

Accounts payable and deposits received

Deposits received

1,188,824

1,188,824

The carrying values of accounts payable and deposits received approximate fair value

Fair Value

Unrealized
Gain/Loss$(7,197)(560)

the stock exchange for the equity instruments, and at the quoted price obtained fromthe financial institution for certain debt instruments.
Lease deposits
The fair values of lease deposits (including allowance for doubtful accounts) aredetermined by discounting future cash flows, which reflect the collectability, using theyield rate of government bonds for the remaining period.

because of their short maturities.

Long-term debt(including current portion of long-term debt)

4,331,126

4,279,074$(52,052)

Total$8,694,884$8,642,832$(52,052)

Lawson, Inc. MD&A 2019

The fair values of investment securities are measured at the quoted market price onFinancial Section

Short-term loans(5) Maturity Analysis for Financial Assets and Securities with Contractual Maturities

These instruments are stated at their carrying values. Because they are determined

Millions of Yen

using floating interest rates that reflect market rates in a short-time and have short2019

maturities, their carrying values are approximately the same as their fair values.
Due in1 Yearor Less

Long-term debt (including current portion of long-term debt)
The fair values of long-term debt are determined by discounting the cash flows related

Due from franchised stores

to the debt at the Companies assumed corporate discount rate.

Lease receivables

2,553

Accounts receivable

120,970

Long-term loans receivable(4) Financial Instruments Whose Fair Value Cannot Be Reliably Determined

Lease deposits

Carrying AmountThousands of
U.S. Dollars

Millions of Yen

2019
Investments in equity instrumentsthat do not have a quoted market
price in an active market

2018

Total

Due after
1 Year through5 Years

Due after
5 Years
through
10 Years

Due after
10 Years¥47,180744¥7,940¥8,62815,986

17,035¥10,259

8,519

24,74725,96147,808¥179,966¥48,672¥51,623¥58,067

2019

Millions of Yen

2018
¥359

¥330

$3,238Investments in unconsolidated
subsidiaries and affiliated companies

18,29815,172

165,040

Others

1,441

1,350

12,997Due in1 Yearor LessDue from franchised stores

2,031

Accounts receivable

82,634

Lease deposits
Total

Due after
5 Years
through
10 Years

Due after
10 Years¥46,599

Lease receivables
Long-term loans receivable

Due after
1 Yearthrough
5 Years¥6,437¥7,957133

15,963

15,963¥15,366

5,912

21,96125,45247,361¥137,309¥44,361¥49,372¥62,727

Lawson, Inc. MD&A 201956

Thousands of U.S. Dollars

2019
Due in1 Yearor LessDue from franchised stores

Due after
1 Yearthrough
5 Years

Due after
5 Years
through
10 Years

Due after
10 Years$425,543

Lease receivables

23,027

Accounts receivable

1,091,097$71,615$77,821Long-term loans receivable

6,711

144,187

153,648$92,532

Lease deposits

76,838223,198

223,157

431,208$1,623,216$439,000$454,626$523,740

Total

Year Ended February 28, 2018

Basic EPS̶Net income available
to common shareholders

Millionsof YenThousandsof Shares

Yen

Net
IncomeWeightedAverage
Shares

EPS¥26,828

100,044¥26,828

100,097

Effect of dilutive securities̶Stock options
Diluted EPS̶Net income for computation¥268.1653¥268.02

22 SUBSEQUENT EVENT
Appropriation of Retained Earnings

21 NET INCOME PER SHARE

The following appropriation of retained earnings was approved at the general

A reconciliation of the differences between basic and diluted net income per share

shareholders meeting held on May 21, 2019:( EPS ) for the years ended February 28, 2019 and 2018, is as follows:Year Ended February 28, 2019

Basic EPS̶Net income available
to common shareholders

Millionsof YenThousandsof Shares

Net
IncomeWeightedAverage
Shares¥25,586

100,057¥25,586

100,104

Effect of dilutive securities̶Stock options
Diluted EPS̶Net income for computation

57

Lawson, Inc. MD&A 2019

Millions of Yen
Yen

U.S. Dollars

EPS¥255.71$2.31¥255.59$2.31

47

Cash dividends, ¥127.5 ($1.15) per share¥12,757

Thousands of
U.S. Dollars$115,063

Independent Auditor’s Report

Lawson, Inc. MD&A 201958

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

http://lawson.jp/en/
Published September 2019©1975-2019 Lawson, Inc. All rights reserved.
Printed in Japan