Creating Happinessand Harmony
in Our Communities

INTEGRATED REPORT 2020

CONTENTS
Creating Happiness in Our Communities (Strategy)Group Philosophy

Our Management Team Is Constructing a New Lawson for a New Era............... P2

Creating Happiness and Harmony
in Our Communities

Message from the President.......................................................................... P4

VisionMessage from the CFO..............................................................................P10

Our goal is to become the hub of
refreshment in every community.

Executive Officer Voices.............................................................................P12

Our role is to maintain happiness in our communities,
Planning for growth in the post-COVID-19 era with a strong awarenessof our mission and responsibility

We will shift our focus from the growth investment undertaken in thepreceding fiscal year to improving the quality of our store opening activities
and reorganizing the stores, and to promoting creation of a robust systemthat can withstand serious crises such as infectious disease pandemics.

•Mitsubishi Corporation’s strategic cooperate system supports Lawson’s efforts toward unique value creation, bringing
happiness to the people of the community.
Member of the Board Yutaka Kyoya•Lawson is pursuing creation of a new convenience store model for an eraof intensified demand for added value.
Member of the Board (outside) Satoko Suzuki•I admire Lawson’s stance of constructing a solid governance system withan eye to the next generation.
Corporate Auditor (outside) Yuko Gomi

[Note:= Whew!]

Steps Toward Creation of Community Happiness
Lawson’s Corporate DNA............................................................................P14

Lawson’s Way (Action Guideline)

Cultivated Strengths

1. Create stores filled with the best smile
in town.

Lawson’s Strengths...................................................................................P16

2. Speak out your ideas to take action.

Value Creation Cycle..................................................................................P18

3. Enjoy your challenge.

Lawson’s SDG Initiatives............................................................................P20

4. Value your friends to become one.
5. Act in good faith.

Deploying the Value Creation Cycle and SDG Initiatives to Create Community HappinessSpecial Feature
Lawson’s DX Strategy................................................................................P22

Value Creation Story
Superior
taste

Corporate GovernanceSuperior taste.......................................... P24
Lawson delivers a delicious life through astonishing products.
1 Original products with continuously evolving rich, delicious taste
2 Foods that bring vibrant color to the dining table
3 Unique LAWSON store development responding to the demands of the community
4 Fun life support / Entertainment 360°

Humankindness

Human kindness..................................... P28
Generating smiles in the community
1 Advancing the theme of “Eat deliciously and improve your health”
2 Supporting a healthy community life
3 Reinforcing support for Franchise stores
4 With Lawson’s Way as the cornerstone, we will build a “Lawson whose personnel can continue working cheerfully and happily with lively, positive energy”
5 S upporting the activities of the women, children and seniors in our communities

Environmental(Machi)friendliness

Environmental (Machi) friendliness..... P35
L awson takes up challenges repeatedly in its commitment toparticipating in the local community and realizing a carbon-free society.

Executives............................................................... P38
Characteristics and system of Corporate Governance.... P40
Compliance and Risk Management............................ P45

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

Financial Section(2020 MD&A)

E S G

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

Financial & Non-financial Overview
Eleven-Year Financial Summary................................ P50
Financial & Non-financial Highlights.......................... P52

Corporate Information

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

Corporate Information............................................... P54• Corporate Data • Share Information• Main Lawson Group Companies • Total Shareholder Return (TSR)• Store Network Development • Main Businesses and Services

E

SDGs Handbook

S

A guide to realizing our Group philosophy,“Creating Happiness and Harmony in Our
Communities,” by determining our MaterialIssues and Key Performance Indicator (KPI)
objectives and incorporating them into efforts
to attain the Sustainable Development Goals(SDGs)

1 P roviding the community with convenience, safety and security through our stores
2 Launching the “Surprise ‘Whew!’ kindness project” to promote environmentallyfriendly lives
3 Reduced use of plastics
4 Reduced food loss
5 Reduced CO2 emissions

Lawson has been adopted as a constituent of the ESG investment stock price index. * Current as of February 2020

Range of the report

Although portions of this report were produced in cooperation 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
affiliated companies.

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 aconstituent 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 theperformance of Japanese companies
demonstrating strong Environmental,
Social and Governance (ESG) practices.
The FTSE Blossom Japan Index is usedby a wide variety of market participants tocreate and assess sustainable investment
funds and other products.”

Reporting period

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

The MSCI Japan ESG Select Leaders Index consistsof companies with high Environmental, Social andGovernance (ESG) performance selected from its
parent index, the MSCI Japan IMI Top 700 Index,
targeting 50% of the market capitalization of each
Global Industry Classification Standard (GICS®) Sectorof the parent index.

*	THE INCLUSION OF LAWSON, INC. IN ANY MSCI INDEX, AND THE USE OF MSCI LOGOS, TRADEMARKS, SERVICE MARKS OR INDEXNAMES 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 2020

The primary focus is on targets for fiscal 2019 (March 1, 2019-February 29, 2020),
but earlier and later activities are also discussed. See Lawson homepage for details:

http://lawson.jp/en/

Future forecasts, projections and plans

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

Financial Section (2020 MD&A)

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

Creating Happiness in Our Communities (Strategy)

Our Management Team Is Constructing a New Lawson for a New Era.

Keiko Hayashi

Kazunori Nishio

Satoshi Nakaniwa

Sadanobu Takemasu

Katsuyuki Imada

Yutaka Kyoya

Miki Iwamura

Satoko Suzuki

Member of the Board(outside)

Member of the Board

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

President and CEO,
Representative Director
Chairman of the Board

Member of the Board
Senior Executive Managing
Officer
Division Director, Corporate
Strategy and Planning Division
Human Resources

Member of the Board

Member of the Board(outside)

Member of the Board(outside)

2
LAWSON INTEGRATED REPORT 2020

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

6

13

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.

Outside(independent)
officers

6
Yuko Gomi

Shuichi Imagawa

Masakatsu Gonai

Eiko Tsujiyama

Keiko Yoshida

Corporate Auditor(outside)Standing Corporate Auditor

Standing Corporate Auditor

Corporate Auditor(outside)

Corporate Auditor(outside)

Femaleofficers

6

13

Ratio of female officers

3
LAWSON INTEGRATED REPORT 202013

Creating Happiness in Our Communities (Strategy)
Message from the President

Our role is to maintain happiness in our communities,
Planning for growth in the post-COVID-19 era with a strong awareness of our
mission and responsibility
Lawson has taken up thechallenge of defining thefuture of the convenience
store.

Sadanobu Takemasu
President and CEO
Representative Director
Chairman of the Board

Over 45 years have already passed
since the birth of Japan’s convenience
store industry. During this period, theconvenience store’s role has diversified
with changes in social needs, which have
gradually transformed it from a quick
shopping venue into an indispensable
part of the social infrastructure
supporting people’s lives.
From the opening of its first
convenience store in 1975 to thepresent, Lawson has been exceptionallyresponsive to changes in the social
environment in accordance with ourGroup philosophy, “Creating Happinessand Harmony in Our Communities.” In2019, we adopted the New Lawson
Declaration, “Hub of refreshment in every
community” as our Corporate slogan.
The Declaration reflects our efforts
to give our customers, as well as theowners and crews of our franchise (FC)stores, a sense of relief stemming from
Lawson’s presence in their regions.
Efforts to determine the ideal format
for convenience store chain operation
received heightened attention in fiscal
2019. With the continuing decline in theworking-age population, worsening of
the labor shortage and rise in labor costs,

Our goal is to become the“Hub of refreshment in every community”
by offering the three “Whew!” Surprises.
Three Promises
Superior
taste

Human
kindness

Environmental(Machi)friendliness* Machi (literally “town”) refers to the communities in which Lawson operates and, by extension, the global village
as a whole.

4
LAWSON INTEGRATED REPORT 2020

questions arose concerning the proprietyof 24-hour operation. Intensifying
competition emerged as a major issue
as a number of chains implemented
strategies aimed at domination. The
Ministry of Economy, Trade and Industry
responded in February 2020 by releasing
a report by the “New Convenience
Store Study Group” recommending
restructuring of the stores’ businessmodel for the new era.
At Lawson, we have been working
to construct an ideal business modelfor the next-generation convenience
store with a focus on reinforcing support
for our franchise stores, improving our
product offering, strengthening our store
capabilities, and supporting our new
stores in a manner that makes the store
owners and crews as well as everyone at
Lawson Headquarters happy. Reinforcing
our communication channels to facilitate
frank, intimate dialogue with the franchise
stores on the front lines of our businesshas produced steady results.
Rather than adopting a domination
strategy, Lawson has opened stores incommunities that genuinely need them,extending its operations into every
prefecture ahead of other chains andpursuing a transition to multiple-store
owner management. We have provided
reduced-hour options to conventional
24-hour operation from the onset,
moreover, increasing the number of
reduced-hour stores from 40 at end
February 2019 to 204 on March 1, 2020.
We have also experimented with New

Year’s holidays at 102 stores nationwide
and with unmanned nighttime operation
at two stores.

Continuing to build strength
after the emergence of the
new COVID-19
Since the beginning of 2020, a major
global environmental change in the formof the new COVID-19 pandemic has
shaken domestic and foreign economies.
Our primary mission is to respondfirst and foremost to crises facing thecommunities in which people live andto support them from beginning toend. We began with efforts to prevent
transmission of the disease in order tocontinue opening stores in response
to community demand, even under thestate of emergency. We moved quickly to
implement measures such as installationof vinyl sheets at checkout counters,
provision of information on diversified
store hours, thorough store interior
ventilation, and installation of alcoholbased hand disinfectant dispensers. We

worked at the same time to expand thenumber of stores in which self-checkout
is available or to which the LAWSON
smartphone cash register system wasintroduced to enable customers to pay
for purchases easily by smartphone.
Our efforts to expand the number ofstores implementing these measures
have created an environment in whichcustomers can continue to shop withpeace of mind.
Lawson employees responded
to the lack of school lunches due tonationwide school closures by personally
distributing rice balls to daycare facilities.
I deeply appreciate this immediate
expression of a desire to help by ourbusiness partners and franchise stores.
I participated with them in requesting
the deliveries, and I shared in the delightinspired by the cheerful, energetic voicesof the many grateful children. Other
unique initiatives during the pandemic
have included sales by LAWSON storesof agricultural products that have lost
market opportunities, campaigns toincrease consumption of milk, demand
for which has plummeted with thediscontinuation of school lunches, andincreased donations of original Lawson

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LAWSON INTEGRATED REPORT 2020

products to food banks. We have alsoestablished a day of appreciation andsupport for medical professionals atsome 320 Hospital Lawson storesnationwide.
The need to shelter at home has
led to reduced movement of people insociety and changed purchasing trends.
The level of consumption has declined inurban areas as more people have turned
to supermarkets and convenience storesin residential neighborhoods with growing
daytime populations. In addition to
reducing loss due to waste, and sharply
cutting fixed costs such as labor, utilities
and rent expenses, Lawson is providing
financial support for stores in city centers
whose sales have declined steeply as
demand for food products such as lunchboxes has decreased. In residential
areas, meanwhile, the good taste of
our Machikado Chubo in-store kitchenitems, which require time-consuming
preparation in the stores, is more popularthan ever. Demand for small-portion
luxury products and health products
is met by NATURAL LAWSON, SEIJOISHII, moreover, while daily foods andfresh produce are supplied at reasonable
prices by LAWSON STORE 100.
I consider it Lawson’s greatest
strength to stock just the right numberof products all aligned with individual
communities’ current needs in all kindsof neighborhoods, whether residential
areas, office districts or suburbs.
Compared to supermarket customers,
who tend to shop for longer periods,
LAWSON customers spend an averageof about three minutes in the store at atime. The stores are safe places where
people can purchase the products theyneed efficiently close to their home orworkplace. Many customers seem tovisit stores simply to refresh themselves.
Even under current circumstances, it
is important for people to find relief insmiles and eye contact, even when
wearing masks.
We also seek to respond to what
we call “shut-in” demand. Besides suchdaily necessities as lunch boxes, frozen
foods, milk, eggs and seasonings, wehave reinforced our offering of sweets
to relieve the stress of self-restraint. In
August 2019, we formed the first tie-up
between a convenience store chain andUber Eats, and we followed up in August
this year by expanding the program to
more than 1,000 stores. We also deliver
items such as magazines along with foodand other daily necessities.
People’s lifestyles can be expected
to change, even after the pandemic isfinally behind us. They will continue to

avoid close contact with others, andworking from home will become thenorm. We see opportunities to create
further demand in the “new normal”
that emerges in the post-COVID
era by leveraging Lawson’s ability torespond quickly to social change. We
demonstrated our capability of thinking
and acting quickly when faced withsuch challenges as the Great HanshinAwaji Earthquake, the Great East
Japan Earthquake and the Kumamoto
Earthquake. We are identifying thecurrent requirements of every community
this time as well, developing wellconsidered strategies for individualstores, and supporting the stores’ efforts
to respond quickly to changes.

Promoting penetration of
Lawson’s Way to assure
success in the retailbusiness
I view our Headquarters and franchise
stores together as a family that is seeking
stability and growth. There is, however,no denying the severity of the conditions
surrounding today’s convenience store
industry. The insufficient profitability
impacting our franchise stores in anenvironment characterized by chroniclabor shortages, increased expenses
and sluggish sales threatens to reduce
job satisfaction and create anxiety
concerning the future. How, then, should
Headquarters respond?
Our objective this year is to

6
LAWSON INTEGRATED REPORT 2020

concentrate closely on our individualof the Lawson’s Way are quite simple. In
franchise stores to guide them to a
my view, their very simplicity brings them
V-shaped recovery in the new normal
closer to the essence. Working sincerely
following the COVID-19 crisis. Thisto make each and every store a “Hubdoes not entail a conflict within theof refreshment in every community” inconvenience store industry but, rather,accordance with our Group philosophy
a victory for every business in the retailof “Creating Happiness and Harmony inindustry, including supermarkets andOur Communities” brings us happinessdrug stores. I consider success in thisas well. But what actions should we takewell within our power. At a time when
to make our communities and ourselves
business configurations are changing,happy? The basic tenets of the pathwith supermarkets selling daily necessities
forward are clearly stated in Lawson’sin addition to fresh foods and drug storesWay.
adding food sections, I think this new
Lawson’s Way also presents
model can be realized by creating uniqueappropriate roles and action guidelines
value for LAWSON, and making it anfor everyone involved in the stores, fromindispensable part of daily life.
Headquarters employees to franchise
An additional facet of our basic
owners and store crews. It comprises
policy for fiscal 2020 is “to improve oursuch simple, easily understandable
franchise stores’ profits” and “to makecontents aimed at grasping the attitudes
LAWSON the most recommended store
and changes of our communities andby Japanese customers.” This means
creating stores our customers reallythat all Headquarters employees should
need, and being prepared to welcome
concentrate on and take responsibility
customers to clean, orderly stores.
for the profitability of our franchise
The first requirement of tomorrow’s
stores. We are promoting this policy as
convenience stores will be to reaffirm,
the foundation for the strongest sense ofand further refine, their commitment
mission and responsibility ever seen at
to staying close to the communities,
Headquarters.
Lawson’s Way, a new action
Lawson’s Way (Action Guideline)
guideline applicable to the entire
1. Create stores filled with the best
Lawson Group, was establishedsmile in town.
in March of this year to motivate
2. Speak out your ideas to take action.
all our franchise store andHeadquarters employees to seek
3. Enjoy your challenge.
an ideal path to becoming the
4. Value your friends to become one.
convenience store of the future.
5. Act in good faith.
The contents of the five items

Message from the President

a strategy that will lead to steady
growth in the coming era. “A familiar
store that brings smiles to faces in thecommunity.” “A place where people
can shop for things they want andinteract with others.” “A part of the social
infrastructure that supports people’s
lives, even in times of disaster.” Thevalue of having such an “indispensable
place in our communities” will become
more apparent than we can imagine withpenetration of Lawson’s Way.

Varied challenges faced by
Lawson’s franchise owners,
our largest group of partners
We will move to improve the stores’
profitability by further strengthening the
support that has long been an elementof special concern.
There are a number of actions that
only Headquarters can take to improve
our franchise stores’ profitability. These
include working to solve problems
facing individual stores from a longterm perspective. Since every store isunique in terms of the circumstances
surrounding its location and customer
base, we do not provide uniform
nationwide guidance, but instead
seek comprehensive solutions to theparticular issues facing individual stores.
Our franchise stores and Headquarters
cannot coexist in mutual prosperity
without the continued powerful,unobtrusive support of Headquarters
employees.
In another important action,
we have established a new support
system to encourage multiple store
owner management, while continuing
to support our single store owners. We
also provide contract matching for new
store openings and training support for
store managers. Going forward, we willcontinue our efforts to expand multistore ownership, which now accounts forabout 45%.
A continued focus on the “Three
Promises” we introduced last year as“indispensable”
Our first promise is “Superior taste.”
Lawson is adept at developing productsthat attract customers with their delicious
taste, as evidenced again last year bysuch hit products as BASCHEE Basquestyle cheesecake and Kinshari onigiri riceballs. Nor is our superior taste limited
to foods. It extends to giving optimalvalue to everything we offer customers,
including our product lineup, quality andservice. In honoring our second promise,“Human kindness,” we are strengthening
our evening and nighttime productoffering to enhance its convenience
for working mothers and singles. We
have also launched foods that are freefrom salt and chemical seasonings, andcosmetics that contain no additives. Our
third promise, “Environmental (Machi)
friendliness,” is expressed through ourmany social infrastructure initiatives
that promote coexistence with the local
community. These include adopting
paper packaging for LAWSON original
products to reduce plastic use, food loss
reduction programs, and CO2 emission
reduction and other environmental
conservation activities.
These efforts have led to the birthof various changes from the inside,
as exemplified by our new productdevelopment at Headquarters. We
eliminated the complicated processes
required to realize ideas by creating ateam with direct ties to the President,
an approach that has engenderedsuch great successes as our Machino Pan (“community bread”) series.
Headquarters has responded to thisopportunity by becoming remarkably

7
LAWSON INTEGRATED REPORT 2020

active. Development lead times havebeen shortened, creating a tangiblestir among customers. And ideas
generated by young employees, who
are themselves core convenience store
customers, can be expected to become
even more powerful as Lawson’s Way
takes hold beginning this year.

Cultivating job satisfaction
among all Headquarters andfranchise store employees
What do I mean by job satisfaction?
This begins, of course, with
providing appropriate employee benefits,
but that is only part of the answer.
It is also essential that we offer
social value with tangible benefits thatworkers appreciate as well as amenable
working environments. These are just a
few of the responsibilities the Company
must reliability meet without reliance on
the opinions of individuals.
Besides introducing business chattools, Lawson Headquarters supplies
employees with Company-owned mobile
terminals that enable browsing of in-house documents to support remotework.
We have been working to digitalize
our store operations since the adventof the digital era. By now, every store
manager knows what products to stockin what quantities depending on thelocation and daily sales conditions at
the store in question. We have installedtablets as well as POS cash registers withmultilingual automatic change dispensers
that are easy for foreign crew members
to use at all the stores. Self-checkout
systems and LAWSON smartphone cash
registers introduced to reduce the burden
on store crews have acquired particularsignificance during the pandemic due tothe reduced interpersonal contact they
permit at checkout. We recognize our
responsibility for sincerely and reliability
ensuring environments in which both
workers and customers feel at ease. A
fusion of warm hospitality that provides
customer relief with digital technologies
that support store crews in their jobs is
one of our long-standing strengths.
Implementing these detailed

measures has enabled our franchise
store crews and Headquarter employees
to conduct their daily work with peaceof mind, and simultaneously facilitatedsharing of the fruits of our foresight with
our many stakeholders into the future. I
believe that our actions from a long-term
perspective will engender job satisfactionin the present for all concerned.

Consideration for the next
generation and concern
for diversity as the keys tosustainable growth
We continue to pursue our missionof realizing the SDGs in accordancewith our position as Japan’s leading
convenience store chain. The steps weare taking now will lead at the same time
to realization of our Group philosophyof “Creating Happiness and Harmony in

8
LAWSON INTEGRATED REPORT 2020

Our Communities.” Lawson created theSDGs Committee in fiscal 2019 to makeproposals for resolution of social issues
in its business activities and to put theminto practice. In April 2020, for example,
we endorsed the TCFD (Task Force on
Climate-related Financial Disclosures),which requires companies to analyze
and disclose information on the risks
associated with climate change that exert
a significant impact on their businessactivities. We are currently preparing
our analysis and disclosure information
regarding the impacts of climate change.
I received a letter recently from a
14-year-old girl who asked, “Why areconvenience stores filled with plastic?”
I mentioned some reduction measures
we are taking earlier, but these represent
only a very small part of the efforts
required to deal with this issue. Her letter
reminded me that plastic reduction is anurgent issue for the generations who will
inhabit Earth in the future. Conventional
thinking will not suffice if we are to fulfill
our responsibility to future generations. I
believe we must go beyond conventional
thinking and sharpen our focus in orderto reduce the environmental burden.
There is another important aspectof Lawson’s thinking I wish to convey.
I am referring to localization. The
conventional standardized convenience
store business model with its uniform
product lineup in stores throughout
Japan and 24-hour operation is already athing of the past.
You can buy bakery items madefrom local ingredients by a group of local
agricultural high school students at a
LAWSON store in Akita, for example, or
rice balls unique to the region containing
Hakata jidori chicken at a store in
Fukuoka. Considering Japan as a whole,Message from the President

we recognize that it is only natural thatevery community should have its own
local culture, values and lifestyle, andthat it is equally appropriate that thestores and their product lineups should
be different as well. To me, this kind ofdiversity is extremely attractive. There isalso value in the ability to buy products
made under the supervision of famous
stores that were previously available onlyin Tokyo at LAWSON stores nationwide.
Thus, both limited local specialties
and nationwide product availability areworthy concepts, but it is incumbent on
Headquarters to consider the opinions of
our franchise owners in order to strike abalance. We should continue to promotea style of diversification that places theemphasis on individual stores by taking
advantage of regional characteristics.
I am convinced that linkage between
localization and the digital technologies
that support it will be essential to future
growth.

Promoting initiatives forcoexistence and mutual
prosperity with franchise
stores nationwide
Lawson is pursuing a variety of new
initiatives.
We are also strengthening our
products to meet new demand in thewake of the COVID-19 crisis with a focus
on entertainment-related businesses
and in collaboration with such Groupbusinesses as NATURAL LAWSON,LAWSON STORE 100 and Seijo Ishii.
As of May this year, points
accumulated in KDDI CORPORATION’s
au WALLET points program have been
integrated with Coalition Loyalty Program
Ponta. Use of data for the membershipbase of over 100 million customers
made available by integrating thesepoint systems has made the process of
predicting consumption trends smootherand provided a broader database fordevelopment of attractive products. We
are also continuing efforts to deal withthe chronic labor shortage by leveraging
support from Lawson Staff Co., Ltd.
as well as by moving ahead with theuse of digital technologies to conduct
unmanned store experiments.
As concerns the ideal form of the
new convenience store of the future,meanwhile, the location of the community
is expected to create a polarization
between stores that favor close humaninteraction and unmanned 24-hour
stores in urban centers that make full useof digital technology. We are confidentof our ability to advance along both
paths simultaneously, however, due tothe many measures we have alreadyput in place and our close ties with ourindividual franchise owners.

Continuing to maximize
the resources of Mitsubishi
Corporation into the future
In closing, Lawson recognizes the
support of our business partner
Mitsubishi Corporation as an extremely
valuable asset. We benefit from
Mitsubishi Corporation’s strengths in
our international operations, including
our overseas store development, rawmaterials procurement and collaboration
with global brands such as GODIVA.
Such Mitsubishi facilities as its
strong, stable logistics infrastructure,
manufacturing bases and overseas
networks provide powerful underpinningfor Lawson’s business activities ingeneral. Headquarters, which stands at
the forefront of our operations, has the
responsibility for determining the optimal
strategic use of the partnership and forlinking it directly to the profitability of ourindividual stores. In the future as well,
we will continue to maintain our uniquecharacter as a listed company, while
effectively leveraging our partnershipwith the Mitsubishi Corporate Groupand making optimal use of its resources
to become our customers’ mostrecommended franchise chain as a clear
route to profitability.
People and businesses worldwide
began to suffer from the COVID-19

9
LAWSON INTEGRATED REPORT 2020

pandemic just as 2020 began. We see
Lawson’s most appropriate response ascontinuing to work resolutely to do what
has to be done. All of us at Lawson aretreating this social transformation as anopportunity to do everything we can toprepare for the post-pandemic era. Seenin retrospect, the accumulation of actions
occurring throughout the Group today
will come to be viewed as comprising amajor change. All these separate actions
will combine to bring about “a newconvenience store for a new era.”
Lawson will continue to raise one
challenge after another as the future
unfolds.

Creating Happiness in Our Communities (Strategy)
Message from the CFO

We will shift our focus from the growth investment undertaken in the preceding fiscal year to
improving the quality of our store opening activities and reorganizing the stores, and to promoting
creation of a robust system that can withstand serious crises such as infectious disease pandemics.
Fiscal 2019 in review

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

Consolidated results for fiscal 2019 (to February 2020)(Unit: Billion yen)
(Fiscal year)

2018

2019

YoY

Gross operating
revenues

700,647

730,236+4.2%

Operating income

60,781

62,943+3.6%

Ordinary income

57,70056,346−2.3%

Net income

25,585

20,108−21.4%

Looking back on fiscal 2019, we see
intensified competition across industrial
borders, increased labor shortages
and rising labor costs. These wereaccompanied by numerous otherchallenges for convenience stores,
including reexaminations of the efficacy of
24-hour operations and the relationshipbetween Headquarters and the franchise
stores. The operating environmentchanged considerably, as the consumption
tax was raised in October, a reduced
tax rate was applied to the convenience
store industry, and a cashless returnsystem under which the government
returns 2 percent of the amount spent bycustomers who pay in a form other thancash was instituted for selected stores.
Intent on becoming the store of choice fora wide range of customers, we worked
intently under these circumstances tostrengthen our evening and nighttime
business, develop attractive products thatmeet customer needs, and present clean,cheerful stores with attentive services.
Faced by such conditions as the ongoinglabor shortage and rising labor costs,
meanwhile, we continued to support
our franchise stores by optimizing store
operations and reducing their workloads
and manpower requirements.
Same store sales in the domestic
convenience store business rose by 0.1%

10
LAWSON INTEGRATED REPORT 2020

from the year before as we expanded
our product lineup by reinforcing ourevening and nighttime operations, andachieved solid sales of such originalLawson products as desserts, bakery
items and enhanced bread products.
Customer traffic declined by 1.6% fromthe previous year in a fiercely competitiveenvironment that extended beyond
industry borders. The customer unit pricerose by 1.7% from the previous year,
meanwhile, impacted by an increase in
the price of cigarettes, a rise in evening
and nighttime purchases and sales ofhigher priced products such as desserts.
We concentrated on opening higher
quality stores during the year, and worked
to create a muscular profit structure by
reorganizing underperforming stores.
Despite a contraction of the store networkby 215 stores accompanying the openingof 554 stores and closure of 769, ourstrategic reorganization proceeded largely
according to plan. As a result, we had
14,444 stores in Japan at end February
2020. The number of overseas storesexpanded by 708 to 2,918, meanwhile,
due in large part to a significant increaseof 639 stores in China.
In our fiscal 2019 consolidated
operations, meanwhile, the abovementioned increase in revenues fromthe domestic convenience store
business was accompanied by strong

performances from Seijo Ishii and ourentertainment-related businesses andan increase in the number of overseas
stores. Both net sales by all stores inour consolidated network and total
consolidated operating revenues
improved as a result, with the former
registering 2,506.9 billion yen (up 3.4%
year-on-year) and the latter 730.2 billion
yen (up 4.2%).

Stronger contribution by subsidiaries
to the consolidated results
In the area of profitability, Lawson Inc. notonly sought to benefit from the effects
of its reorganization of underperforming
stores, but also to cut disposal losses
by the franchise stores and reduce
Headquarters’ costs. Despite these
efforts, increased IT-related expenses
stemming from support for the franchise
stores and updating of store computers
resulted in a decline in operating incomeof 900 million yen from the previous year
to 44.7 billion yen.
Operating income achievedby Lawson’s consolidated Groupsubsidiaries rose to 62.9 billion yen (up3.6% year-on-year), a result boosted
by profits attained by Seijo Ishii and ourentertainment-related businesses, both ofwhich recorded strong sales, along withthe cost-reduction effect of our financial

sector operations. Profit increased by
2.1 billion yen from the previous year. As
concerns consolidated ordinary income
and net income, meanwhile, ordinary
income registered 56.3 billion yen, adecrease of 1.3 billion yen from theprevious year, while net income slipped to20.1 billion yen, a downturn of 5.4 billion
yen owing to the recording of losses
in connection with the consolidation ofunderperforming stores.

Business outlook for 2020
With the new COVID-19 infection
spreading worldwide in the current fiscal
year, the Japanese government issued
a state of emergency that lasted from
April to May. This has had a significant
impact on the domestic and international
business environment. In the domestic
convenience store business, daily sales
by existing stores fell by 4.8% fromthe previous year due to a precipitous
decline in sales by stores in locations
such as business districts as many
people abstained from leaving home
to work. Buffeted by related costs,
Lawson’s operating income is expected
to decrease by 19.7 billion yen from thepreceding year. In its entertainmentrelated businesses, the Company’s
first-half sales are expected to suffera significant decline due to event
postponements and cancellations,with circumstances such as the
postponement of movie releases adding
to the problems. These factors are
expected to result in a downturn in salesof 8.2 billion yen from the preceding year
and to consolidated operating income of
35 billion yen (representing a decrease inprofit of 27.9 billion yen from the previousyear), with estimated consolidated net
income registering 5 billion yen (down15.1 billion yen from the year before).
Despite the unprecedented natureof the surrounding business environment
in fiscal 2020, we continue to stressthe importance of stable franchise store
management and our pursuit of efforts
to improve their profitability. Turning
our thoughts to "things Lawson can donow," we will conduct business in close
cooperation with our franchise stores withthe aim of becoming an "indispensable
presence in the life of the community.”

Cost of capital and financial discipline
Fully conscious of the level of capitalcosts that reflects our profit expectations,
we are raising our ROE (return on equity),
an indicator of capital efficiency andan important management index, in aneffort to generate profits exceeding ourtarget level and to maximize corporate
value over the medium to long term. In
our commitment to achieving sustainablegrowth, meanwhile, we observe financial

discipline by preserving/improving our
net debt-to-equity ratio while promoting
asset value replacement and improved
financial efficiency Groupwide.

Provision of returns to shareholders
with an eye to sustainable growth
Finally, as concerns dividends, werevised our dividend policy in fiscal 2019
by introducing a “consolidated dividend
payout ratio.” Our focus on returns toshareholders’ remains unchanged. We
will pay the highest dividend possible
within this dividend payout ratio, while
continuing to invest in supporting ourfranchise stores and improving theirprofits to assure sustainable growth.
With this in mind, we have establisheda minimum annual dividend of 150 yen
per share and a return to shareholders

targeting a consolidated dividend payout
ratio of 50%." We have accordingly set
a dividend of 150 yen per share for fiscal
2019 and an annual dividend in the sameamount of 150 yen per share for fiscal
2020. Although the impact of the new
COVID-19 pandemic will drive profits
down in fiscal 2020, this annual dividendof 150 yen per share is the lower limit
for dividends according to our current
dividend policy.
We consider stable provision ofsafe, secure products as the proper path
to realizing Lawson’s Group philosophyof "Creating Happiness and Harmony
in Our Communities." With this in mind,
our executive officers, employees, andfranchise store owners and crews will
combine forces to overcome the difficulties
posed by the COVID-19 pandemic.

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

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

245

250

255

Dividend payout ratio (right axis)
(%)

255

150
120

95.1
78.1

99.7

68.7

150

90

74.6

60
30

2015

11
LAWSON INTEGRATED REPORT 2020

2016

2017

2018

2019 (FY)0Creating Happiness in Our Communities (Strategy)
Executive Officer Voices

Mitsubishi Corporation’s strategic cooperate
system supports Lawson’s efforts toward
unique value creation, bringing happinessto the people of the community.
Member of the Board Yutaka Kyoya
Executive Vice President, Group CEO,
Consumer Industry Group, Mitsubishi Corporation

Yutaka Kyoya

Member of the Board

Satoko Suzuki

Member of the Board (outside)

Yuko Gomi

Corporate Auditor (outside)

Contemplating a wide range of responses as we takeup the challenges of our new era
The year 2020 began with our global society and economy in turmoil. The significanceof the convenience store, a cornerstone of community infrastructure, was once again
brought home to society.
Two main questions have arisen for Lawson’s management: How should convenience
stores respond at a time when social norms and lifestyles are being questioned; and what
direction should Lawson take in pursuit of the happiness of its franchise store owners andcrews, customers and communities. We asked three of our Outside Directors to share
their opinions concerning these issues.

12
LAWSON INTEGRATED REPORT 2020

The business environment in which theconvenience store industry operates
today is changing at a rate no one could
have anticipated when I became a
Director eight years ago. We are clearly
entering a more turbulent period than
we have ever experienced in the past.
The convenience store industry has
been particularly responsive to change
since its inception, however, consistently
serving as a standard bearer for reform.
Lawson must therefore be prepared to
improve its ability to respond to change
and create values of its own. I expect
these circumstances to make the roleof the Board of Directors, including theindependent directors, more important
than ever.
The Company’s strategiccooperation with Mitsubishi Corporation
will be leveraged further as it seeks
growth as an independent listedcompany. Lawson’s alliance with KDDI
CORPORATION is a good example
of its use of Mitsubishi Corporation’s
resources. These two partners haveestablished a system of pursuingsynergies that transcend their industries.
We at Mitsubishi Corporation will spareno effort to support Lawson’s growthby acting to strengthen its relationships

with companies in other industries—
without limitation to those in the supply
chain.
My eight years of observing
Lawson have shown me that its greatest
strength is the relationship of trust it
has built with its franchise stores. This
year, Lawson introduced a fundamental
policy of pursuing unprecedented efforts
to increase the franchise stores’ profits.
This strikes me as perfectly appropriate.
The Company is also making steadyprogress toward realization of such
SDG initiatives as reductions in CO2emissions and food loss.
The formulation of Lawson’s
Way has contributed further to its
progress, moreover, by making it easierfor the franchise stores and otherbusiness partners to understand how
Lawson thinks and operates. With thisclarification of the Company’s direction,
its various undertakings will advance at
an accelerated pace. As a member ofthe Board of Directors, I will contributeall I can to constructing a newconvenience store model that will bringhappiness to Lawson’s franchise storesand communities.

Lawson is pursuing creation of a newconvenience store model for an era ofintensified demand for added value.

I admire Lawson’s stance ofconstructing a solid governancesystem with an eye to the next
generation.

Member of the Board (outside) Satoko Suzuki

Corporate Auditor (outside) Yuko Gomi

Associate Professor,The School of International
Corporate Strategy at the Graduate School ofBusiness Administration, Hitotsubashi University

I perceive the format of the Japaneseconvenience store to be entering a
new phase. Whereas easy access andconvenience propelled growth in the
1980s and ‘90s, product appeal andadded value will be the motivators of
the future. So, how can Lawson set
itself apart? I believe the possibilities areenormous.
A year has now passed since
I became a member of the Lawson
Board of Directors with its free, open
atmosphere. The wisdom based on thehigh-level motivation and intelligence
every member brings to our meetings
ensures lively discussions. The highratio of female members enables us todiscuss the convenience store business,a living part of the social infrastructure,properly from the perspective of women.
The focus of my own university
research and teaching is on design
thinking and marketing, and I am
drawing on my knowledge in these fields
to contribute proposals for Lawson’s
new value creation. One importantconcept of design thinking is repetitionof an agile, flexible approach from theuser’s perspective.
If we could always perform small
experiments at the stores, which are

Lawyer (Partner)
T. Kunihiro & Co. Attorneys-at-Law

our customer contact points, to identify
optimal solutions that enable us torespond quickly to social conditions,individual community environments andcustomer trends, for example, it would
enhance the strength of Lawson as awhole. This will require more detailed
support in terms of human and financial
resources and information-sharing.
Lawson’s efforts are extremely
admirable, moreover, in these timesof heightened concern for corporatesocial responsibility. Even in the midstof the COVID-19 pandemic, we havecontinued to pursue social support
activities one after another in an ongoing
effort to realize our Group philosophy ofcreating happiness in our communities.
However popular online shopping
may be, people will continue topatronize actual stores to enjoy exciting
shopping experiences. The question
we are asking is, how much added
value can the stores provide? I havehigh expectations for Lawson’s sincere,faithful efforts to create the convenience
store of tomorrow.

This year is my second as an Outside
Corporate Auditor at Lawson. Everymeeting of the Board of Directors has
a free, open atmosphere. President
Takemasu’s policy, reflecting his
characteristic openness, is to allow us
independent officers with our diverse
backgrounds to draw on our varied
expertise to offer honest opinions, even
if harsh, identify good proposals andcontribute to decision-making throughparticipation in essential constructive
discussions. I consider this approach to
governance to be highly effective.
My own role as an attorney is tohelp guarantee the quality of management
decisions by ensuring that the decisionmaking process is functional and that
potential risks are considered. Even where
Mitsubishi Corporation is concerned, we
rigorously investigate the decision-making
concerning individual projects from theperspective of profitability for Lawson,a Mitsubishi Corporation subsidiary,and its shareholders. While maintaining
independence, Lawson is currently
pursuing various initiatives with its parent
company in a spirit of positive collaboration.
I might add that Lawson’s risk
management systems are firmly
established. The Company has reported

13
LAWSON INTEGRATED REPORT 2020

only minor risk issues despite its
membership in the retail industry, whichis constantly encountering new risks
stemming from its close interactions
with customers. I am reassured andhighly appreciative of the positive attitude
Lawson has shown by sharing negative
information quickly, responding calmly
and promptly, and taking measures toprevent future recurrences.
I had a good opinion of Lawson
even before becoming an Outside
Auditor. I was impressed by its uniqueproduct development in accordance withnew values and lifestyles, and with thewarm customer service provided by its
store crews. As a LAWSON customer as
well, I expect great things of its productdevelopment and its creation of uniquestores suited to particular communities.
Lawson will further strengthen its
partnerships with its franchise storesin the future. In this connection, setting
target values for increasing the profits
of the franchise stores is an especially
positive initiative. Today’s fiercelycompetitive business environment andsocial situation may conceal the numbers,
but I anticipate excellent results from
Lawson’s flexible attitude toward change
and its open, positive corporate culture.

Steps Toward Creation of Community Happiness
Lawson’s Corporate DNA

From being the handyman in the community to being a role of social infrastructure,
Lawson strives becoming a “Hub of refreshment in every community”— Lawson’s history of continuous innovations and challenges, responses to which include incorporating community voices to achieve its Group 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 toStarted automated teller machine (ATM) service
continue pursuing and advancing the “Hub of refreshment in every communities” from the customer’s perspective.
Established a joint ATM management company “Lawson ATM Networks, Inc.”

1996
1983

Started copying and printing services

1975

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

1986

Launched “Lawson Ticket” service

1989

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

1996

2001

Opened first “NATURAL LAWSON” store

2002

Opened the first overseas store in
Shanghai, China

Launched “Onigiriya”- the new rice ball brand1998

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

Started third-party billsettlement services for thepayment of electricity andwater bills

1977

Started 24-hour/day operations

2003

Introduced “Loppi”
multimedia terminals toall stores

1991

2004

Started Yu-Pack; Japan Post’s domestic
parcel delivery service

Established “postboxes” in
LAWSON
storesnationwide

2005

Opened the first “LAWSONSTORE 100” store

Lawson as social infrastructure

Handyman in the community
Started social and environmental activities

Started the challenges to reduce food waste, plastic use, and CO2 emissions

1992

Set up store
donation activity

1995

2003

The Great Hanshin-Awaji
Earthquake1998

ISO 14001 certification(Shifted to the operation undera voluntary environmental
management system in December
2019)

1994

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

1999

Stopped including chopsticks
spoon, or fork in boxed meals

2000

Mt. Fuji forest improvement project

Joined “Arakawa River clean Aid”

	Started recycling waste oil in all stores	Launched school afforestation projects

1997

Announced the Declaration of Commitment
to Clean rest room

1975

1980

Commencement of the
Takenokozoku dancers
Shinkansen service to Hakata

1983

Middle Japan Sea Earthquake

2006

1989 Era name change (from 1991

Showa to Heisei)
Gulf War
Introduction of consumption tax

1995

1997

Great Hanshin-Awaji Consumption tax
Earthquake
increase: 3% to 5%

14
LAWSON INTEGRATED REPORT 2020

2007

Started “Bring Your Own
Bag campaign”

2009

2014

Launched “L-Chiki (fried chicken)”

Seijo Ishii

2018

2019

Lawson Bank

Started tie-up with
Uber Eats

Launched theoperation of
Lawson Bank, Inc.

2010

Launched the Coalition Loyalty
Program Ponta

Acquired supermarket chain
SEIJO ISHII CO., LTD.

Lawson strives becoming a“Hub of refreshment
in every community”

2018

Introduction of the LAWSON
smartphone cash register

2014

2019

UNITED CINEMAS

2010

Established the
LAWSON Farm

Started the operation of fully
customer-operated new-type
POS cash registers

2011

Established Lawson
HMV Entertainment,
Inc. (currently Lawson
Entertainment, Inc.)

New Lawson Declarationfor everyone by offering
the three “Whew!” Surprises.
Three Promises

2018
Acquired UnitedEntertainment Holdings
Co., Ltd. via Lawson HMVEntertainment, Inc.

Introduction of POS
cash registers with
automatic change
dispensers

Superior
taste

Human
kindness

Environmental(Machi)friendliness

Building stores meeting
community needs
Full-scale initiatives for
SDGs

Started health initiatives

2010

Opened first eco-friendly
model store

2008

Set own action targets for reducing
CO2 emissions2012	Launched branbread that contains
grain husks
	Started mobile
sales of foodproducts and daily
necessities

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

2008

Great Recession

2015

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

2014

2011

2011.3.11

Great East Japan
Earthquake

1. Create stores filled with the best
smile in town.

2017

Selected as a Nadeshiko Brand (fiveconsecutive years 2014–2018)2014

Consumption tax
increase: 5% to 8%

Set up the “Support
Dreams Fund”(Scholarship Programfor children fromsingle-parent
families)

2. Speak out your ideas to take action.

2019

2016

Obtained the Resilience
Certification

2019	Established the “SDGs
Committee” for the promotionof the SDGs
	Set up the “Dream classes”
Fund to communicate theimportance of having dreams
to elementary and junior highschool students

Consumption tax
increase: 8% to 10%

15

Lawson’s Way (Action Guideline)

2020

Spread of COVID-19

3. Enjoy your challenge.
4. Value your friends to become one.
5. Act in good faith.

Cultivated Strengths
Lawson’s Strengths

Evolving with our communities by responding to their needs from diversified perspectives
Throughout the 45 years since Lawson’s birth, the Company has evolved continuously with the happiness of its communities as its first priority.
Lawson’s unique customer-oriented business model is characterized by “responsiveness to the needs of everyday life,” “advanced store productivity” and “small commercial areabased manufacturing and retailing.” Linkage of this model with execution of appropriate management strategies has created numerous strengths that are linked, in turn, to sustainableimprovement of its corporate value. Lawson will continue to execute this pattern of response and reformation, encouraged by the voices of customers saying, “Thank goodness for
LAWSON,” or “I want to shop there because it’s a LAWSON store.”

A philosophy and culture that value the community andits people

Offering the requisite diversity and spirit of challenge torespond quickly to changing social needs

We share our Group philosophy with ourfranchise stores, our closest partners, andcooperate closely with them by creating various
opportunities for dialogue to create happiness inour communities. We will contribute to the healthof our communities by providing them withlively, energetic stores. Another key factor is thewillingness of our employees themselves to take the initiative in considering what they
can do for the communities and to act accordingly. This attitude generates social support
in the event of disasters or emergencies, and a deep awareness of environmental issues.

Besides varying our store format development to suit thecharacteristics of our communities, we pursue businesses inindustries ranging from the entertainment to financial industries.
Committed to improving customer convenience, we embody anattitude of taking up challenges quickly and flexibly, as seen in
the leadership we displayed by becoming the first convenience
store in Japan to offer Uber Eats services and then actively
expanding this program.

LAWSON ATMs

Lawson Group(Domestic convenience stores)

13,353 machines
SEIJO ISHII

Machikado Chubo
in-store kitchens

154 stores*	Stores operated directly by SEIJOISHII, CO., LTD.

5,861 stores

16
LAWSON INTEGRATED REPORT 2020

14,444 stores

Stores in hospitals(Hospital LAWSON)

323 stores

Use of our Ponta membership base and digitaltechnologies for statistical analysis of customer needs
Offering original safe, healthful anddelicious products and services
Lawson’s selection of delicious, highquality sweets made convenience store
sweets popular in Japan. We also boast
highly developed capabilities in provisionof delicious, healthful foods containing
reduced salt, sugar and additives. We
helped to pioneer convenience store
sales of OTC drugs as well. Other
innovations include stores insidehospitals with appropriate products andservices and stores with community
support facilities such as nursing carecenters.

The Lawson SCM-CRM model is employed to conduct statistical analysis of
the purchasing behavior of Ponta point club members and other customers,
and to deploy it for product development that meets customer needs as well
as for planned ordering at every store. The model’s many effects include amore accurate
Visualization
Product
awareness ofof opportunity
development
loss
people’s needs,
labor saving inthe stores and
CRM
High added
SCM
value raw
Order
Customer
reductions in
Supply chainmaterials
planning
relationshipprocurement
management
management
food loss. It has
also served as adriving force for
Optimized
Manufacturing
product
and logistics
profit expansion.
lineupExtending community
happiness across national
borders
The communities benefiting from Lawson’s
concern are not limited to Japan. We arecontinuously extending the range of ourstore openings, especially in various regionsof China.
Other markets in which we are
expanding our store network outside Japan
include Thailand, Indonesia, the Philippinesand Hawaii, U.S.A. At end February 2020,
our overseas network numbered 2,918
stores.

HMVLAWSON stores selling
Over-the-counter (OTC) drug

Shenyang

56 stores

222 stores

Beijing
DalianHefei
Wuhan

Stores with nursing careconsultation desks for seniors(Care-focused LAWSON)

UNITED CINEMAS

Chongqing
Changsha

389 screens

24 stores

Philippines

Thailand* Figures for Lawson services are as of end February 2020.

17
LAWSON INTEGRATED REPORT 2020

ShanghaiIndonesia

HawaiiDeploying the Value Creation Cycle and SDG Initiatives to Create Community Happiness
Value Creation Cycle

Lawson contributes to happiness and harmony in its communities by creating added
value through its customer-oriented business model.

,

Social challenges Lawson is tackling

Business Model

InputsVisionDeclining 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)
Projected rate of increaseby 2025 compared with 1990 Approx.

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 fiscal 2016 (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

2˚C or lessOur goal is to become the hub of
refreshment in every community.

Human capital (human resources)
Employees’ collective skills and capabilities,
personal motivation and organizational experiencethat contribute to sustainable corporate growthBusiness Policy (Three Promises)

Superior
taste

Financial capital (funds)
Capital raised to fund business activities throughsales of shares and borrowing

Manufacturing capital (IT and infrastructure)

Community
customers

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

Environmental(Machi)friendlinessIntellectual capital (technologies and brands)
Lawson’s combined intangible assets, including
brands, appraisals, expertise, purchasing data,
intellectual property and software

Personally rewarding/active Lawson’s Way (action guidelines)
for franchise stores and employees

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

Humankindness

Business basis
Coexistence and mutual prosperity with franchise stores
Reinforced corporate governance

C1
18
LAWSON INTEGRATEDINTEGRATED REPORTLAWSONREPORT2020
2019

Respect for human rights in the supply chain
Thorough risk management and complianceGroup Philosophy

Creating Happiness and Harmony in Our Communities

Outputs

Outcomes

Nurturing human resources who are
self-motivated and innovative to satisfy local
community needs appropriately

Investment determined according to capitaldiscipline to meet the expectations of theequity market

Lawson wants to join you in creating excitement by becoming your “Hub of
refreshment in every community” with a three “Whew!” surprises. A new
LAWSON for a new era.

Leveraging the full supply chain to develop
products that meet local community needs

Surprise“Whew!”
discoveries

Cultivating innovation based on prompt
perception of changes in local communities

We will protect the social environment bysuch means as working to forma carbon-free society.

C2
19
LAWSON INTEGRATEDINTEGRATED REPORTLAWSONREPORT2020
2019

Surprise“Whew!”
happiness

Surprise“Whew!”
kindnessDeploying the Value Creation Cycle and SDG Initiatives to Create Community Happiness
Lawson’s SDG Initiatives

Contributing to the SDGs
– Determining Material Issues / goals (KPIs) and implementing sustainable initiatives –Based on our Group philosophy, “Creating Happiness andHarmony in Our Communities,” we promote customeroriented business activities aiming to become the hub of
refreshment in every community. Believing that striving
to realize the “Three Promises” eventually promotes theSustainable Development Goals (SDGs), we aggressively
address our challenges.
Sharing issues faced and progress made toward theirsolution at the SDGs Committee
In March 2019, we established the “SDGs Committee” aiming to realize
a sustainable society through Lawson’s business activities, and haveconducted initiatives leading to solutions for social issues one by one
through a step by step approach. While each division spontaneously
works to realize the “Three Promises” through their business activities,
we promote initiatives linked to SDGs, and periodically come up withsolutions for challenges and report on progress through the SDGs
Committee. While the committee takes the initiative in fulfilling oursocial responsibility by taking steps to solve social issues, we continue
striving to enhance our corporate value and achieve sustainable growth.

Steps toward realizing the SDGs
Lawson has been working to realize the SDG vision since 2019. We areadvancing these efforts step by step, from STEP 1: promoting understanding of
the SDGs to STEP 5: reporting and communicating our initiatives, and continually
taking up challenges to achieve the KPIs (key performance indicators).

STEP 1 Promoting understanding the SDGs
Companywide employee e-learning
New employee training
Awareness-raising activities such as Lawson seminars / exhibitions for franchise owners
Information dissemination through company newsletters
Study sessions at the various headquarters

STEP 2 Prioritizing the issues
Position our business in the value chain, and identify the social issues facing it.
Link the positive and negative impacts of our operations-related social issues
with the SDG goals.
Score the magnitude of the impacts exerted on our company and society.
Place high-impact issues in a matrix.
Determine Material Issues.

Audit & Supervisory
Board

President

Management meeting

SDGs Committee (Held on a quarterly basis: All Division Directors)

Secretariat

SDGs Promotion Group Meeting (Held on a monthly basis: General Managers and higher)

We are pursuing steady efforts toachieve the KPIs we determinedin fiscal 2019 with respect to theissues and conditions faced in
the social environment.

Take on more difficult challenges!!

Reducing food waste

Reduce by50%
v. 2018 levels

Reduce by30%
v. 2017 levels

STEP 5 Reporting and communicatingIssuance of the “Integrated Report” and “SDGs Handbook” / dissemination on
websites, etc.
Participation in initiatives such as TCFD (See box at right.)
Promotion of dialogue with stakeholders

20
LAWSON INTEGRATED REPORT 2020

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.

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

Lawson’s original products
Eco-friendly materials

50% usedA ddition of “SDGs Initiatives” to the positive items for organizational
performance evaluationM anaging progress forward goals (KPIs) / pursuit of Material Issues management items
Addition of SDG items to the employee award system
Call for opinions and suggestions from employees

Lawson Blue Challenge 2050!

Reducing food waste

Reducing plastic

STEP 3 Setting performance goals

STEP 4 Integrating the program into management

Board of Directors

Lawson’s Vision 2050

Plastic for containers andpackagingSelect the Material Issues for which you can set targets for 2030.
C onsider the contents of the target candidates selected by the supervising department.
O btain approval of the target contents (target year, numerical values, etc.) by the
Board of Directors.
Determine the KPIs.

SDGs Committee Organization

Goals for 2030 (KPI)

100% used

Reducing CO2 emissions
CO2 emissions per store

Plastic shopping bags

Reduce by100%

Reducing CO2 emissions
CO2 emissions per store

Reduce by30%
v. 2013 levels

Reduce by100%

We examine and discuss what we should
do now by focusing on “Lawson’s Vision
2050,” and looking back on what we havedone so far to steadily proceed with ourmaterial issues and KPIs for the SDGs
(Sustainable Development Goals to beachieved by 2030).
Lawson endorsed the Task Force on Climate-related Financial
Disclosures (TCFD) in April 2020. We will respond to theintensifying challenges posed by climate change by analyzing
climate-related risks and opportunities, grasping the impact
on our business strategies, considering countermeasures andactively disclosing information.

Lawson’s
Material Issues

We classify our activities with respect to the value chain into six categories based on the “Three Promises” to customers enumerated in our business policy, and in consideration of pertinent social issues and circumstances.
We make decisions from the customer’s point of view, with the primary emphasis on the safety and security of retailers and on social infrastructure initiatives for the retail industry.
We will not change our Material Issues before 2030, but will continue to increase our contribution to realizing the SDGs by improving and eliminating major initiatives and services through such means as discardingsome that have already been completed and adding new ones.

Business Policy

Applicable SDGs

Superior
taste

Surprise “Whew!”
discoveries

Humankindness

Material Issues (Materiality)

Major Initiatives and Services

Providing Safety/Security-oriented
Overwhelmingly High Value-Added Products andServices Friendly to Society and the Environment	Providing high value-added private brand products (rice, frozen foods, andfast foods)
	Deployment of Machikado Chubo in-store kitchens	Planning and developing locally-produced products for local consumption,and spontaneously utilizing domestic ingredients	Developing and selling products under consideration of the society and theenvironment (MACHI café, NATURAL LAWSON brand, etc.)	Deployment of LAWSON Farm agricultural products (Nakashima-method/GAP certification)
	Developing and operating a stable supply chain including manufacturing anddistribution
	Conducting fair trade with suppliers (raw materials procurement, purchasing
management optimization)

Supporting Health Promotion for All People
Through Products and Stores	Developing low-salt, low-carb, and additive-reduced products	No use of preservatives and artificial colors
	Changeover to easily understandable nutrition facts
	Creation of a pharmaceutical product sales system
	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’	Creating a comfortable work environment for store crew (Introducing new	Enhancing communication with franchise stores (establishment of the

facilities, changing the work process, etc.)	Training and retention of store crews (Fantasista qualification system, use ofearly-stage educational materials)
	Introduction of an owner support system (support for franchise owners toallow vacations)	Promoting the MO system for multiple-store management

Providing Comfortable Work Environments
Leading to Job Satisfaction

Surprise “Whew!”
happiness

Surprise “Whew!”
kindness

Franchise Store Advisory Committee and owner hotline)	Promotion of work-style diversification (examination of remote work

systemization)
	Development and expanded use of leaves for maternity, childcare, nursing,long-term care, etc. (operation of nursery school)	Maintaining Scholarship program for children from single-parent families
	Promoting fund-raising programs for children’s futures (school afforestation

	Deployment of “Care-focused LAWSON for Senior Citizens” program (support

activities, “Dream Classes”, etc.)
	Children’s learning support (Kyoto Student City, acceptance of work
experience, on-site lessons, etc.)
	Donation of products to facilities that require food support

	Promoting Safety Station (SS) activities (community watch service for

Coexisting Synergistically with Communities byServing as Part of the Social Infrastructure	Promoting mobile sales and delivery services including home delivery.
	ATM services of Lawson Bank	Government certificate issuance services
	Executing comprehensive regional agreements with the local governments

	Reviewing of the Business Continuity Plan (BCP)	Collaboration with national and local governments to support stricken areas

Sustainable Environment Preservation Activities
Toward a Carbon-Free Society	Promoting energy efficient stores (CO2 reduction) (Introducing and operatingenergy efficient equipment)	Utilizing and spreading renewable energy (solar power, etc.)	Efficiency enhancement of distribution and promotion of changeover toenvironment-friendly trucks (CO2 reduction)

	Promoting food waste reduction (food recycling, etc.)	Reducing plastic used for plastic shopping bags and containers andpackaging

Supporting Women and Seniors as well asChildren’s Growth

Environmental(Machi)friendlinesschallenge for health)21
LAWSON INTEGRATED REPORT 2020

for long-term care), regional revitalization events
women, children, and seniors)in the event of disasterSpecial Feature Lawson’s DX Strategy

Constant pursuit of innovations leading to ongoing change in theconvenience store industry
Convenience stores are the innovators in the retail and distribution sectors. This is especially visible in thesignificantly accelerated transfer to the retail industry in general over the past 20 years of improvementsin efficiency and labor-saving mechanisms making full use of IT technologies that were first disseminatedamong convenience store chains. Lawson, a leader in the development and introduction of such systems
as the semi-automatic ordering system and POS cash register with automatic change dispenser, hasbeen working actively to improve efficiency and productivity in the face of a serious labor shortage.
Today, we are committed to continuing this tradition of change. We believe that next-generation
convenience stores should take various forms, depending on the community in which they are locatedand the makeup of their customers. The store crews and customers will also demand technologies thatare not only more advanced, but also more diverse. In a notable response, Lawson established the Open
Innovation Center in May 2017 to investigate the future of convenience stores from multiple directions,and to pursue new innovations applying leading-edge digital technologies.
The Center’s mission is to determine what actions we should take, now and in the future, that are
difficult to implement under the existing organizational structure, and to collaborate with domestic andoverseas corporations and government bodies in conducting experiments and verifications in connection
with Lawson’s digital transformation. Our use of a laboratory inside the Center that mirrors an actual store
laboratory verification
actual store experiment” overto repeat a cycle of “introductory examinationand over helps to facilitate fast, smooth deployment of technologies in the stores. The Center has also
tested walk-through checkout, real-time inventory management and register-free checkout systems withbiometric authentication in actual stores. Other innovations
under consideration include the deployment of robots instores and the use of drones for home deliveries.
These efficiency enhancement efforts stem first andforemost from our desire to serve people. Introducing
leading-edge technologies enables us to acquire an
accurate grasp of customer needs and reduce the burden
on workers, facilitating provision of more detailed services
and increasing value for customers by welcoming them topleasant, convenient stores designed to delight community
residents. We ourselves take great pleasure in the days spent
in research for this purpose.

Kunitsugu Makino

General Manager, Open Innovation Center

22
LAWSON INTEGRATED REPORT 2019

Lawson Go Shinkawasaki
store
Customers gain entrance
to the store by holding the
QR code displayed on a
dedicated smartphone
app over the gate.

Use of digital technologies for enhanced efficiency and labor savings

Ongoing efforts in pursuit of a digital transformation

The chronic labor shortage and soaring labor costs have emerged as major issues for the convenience
store industry. Lawson has strengthened support for its stores by making full use of various IT
technologies to save labor in daily store operations and to create comfortable work environments forseniors and foreign nationals. Automation of checkout operations using innovations such as POS cash
registers with automatic change dispensers and LAWSON smartphone cash registers has reduced theburden on store crews and shortened waiting times for customers at the checkout counter. In 2019,we speeded up the introduction of self-checkout services that enable electronic payment to all thestores. We also installed new computers in all the stores, improving work efficiency by acceleratingprocessing speeds. We provide strong support for multiple-store owner management by leveraging anowner portal function that permits checking of management and other information for any store, and aremote login function that enables multiple-store managers to place and receive orders remotely.
We are experimenting at the same time with a system in which stores are open for business without
staff during five late-night hours. Customers unlock the door with a dedicated smartphone app andconduct self-checkout or LAWSON smartphone checkout when they finish shopping. Experiments arealso underway with cashier-less stores that employ biometric sensors on product shelves to enable
customers to make payments simply by picking up products and exiting the store with them. We will
make active use of the results of these and other experiments, including shelf stocking by robots andproduct management using electronic tags, in stores that need them.

Further deployment of digital technologies is indispensable to Lawson’s efforts to increase theprofit margins of the franchise stores and ensure job satisfaction while seeking to become ourcommunity residents’ “No.1 most recommended store” by constructing the next-generation
convenience store model. Looking ahead to future changes in the market and working
environment, Lawson is deploying a digital transformation to implement Companywide
system reforms and changes in a committed pursuit of medium-to-long-term strategies toeffect convenience store innovations for the fast-emerging new era.
During the current fiscal year, Lawson established the Digital Transformation Promotion
Committee under the direct control of the President and charged it with the responsibility
indicated by the slogan “Digital IT Strategy 2020.” Structural reform employing digitaltechnologies, restructuring of the Headquarters organization and culture, and corresponding
reinforced penetration of IT human resources strategies and development are all on theagenda. We are also pursuing a steady approach to realizing the SDGs through applicationof IT technology. As concerns the various core systems that support Lawson’s IT, meanwhile,
we will sort out currently existing complications, strictly review the IT cost structure, andconduct planned investment to promote a gradual reduction in IT costs.

Steps to improve efficiency and productivity by utilizing digital technologies
2017

In 2017, we reorganized the operations of our Machikado

Optimizing the operation Chubo in-store kitchens, which prepare freshly madeboxed meal and bakery items at LAWSON stores,of Machikado Chubo
to optimize the operational efficiency of their workin-store kitchensprocedures. We are developing a lineup that can be2018

LAWSON smartphone cash register, a mobile payment systemusing customers’ smartphones, was introduced at some stores.
Introduction of LAWSON
in 2018. Customers pay for purchases simply by downloading thesmartphone cash registers app and scanning barcodes printed on product packages with theirsmartphones. The process is completed in approximately a quarter of
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 in the morning andat lunchtime can significantly reduce waiting time at the checkout
counter. The system is in operation in 115 stores in Japan (as ofAugust 2020), with sequential expansion of its deployment under way.

prepared easily by unifying the product packaging andproduct quantities. This has led to a 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 in-store kitchens installed.

2010

2015

Semi-automatic ordering &planned ordering systems

Lawson introduced an AI-based semi-automaticordering system in 2015. The system analyzes data onsuch various factors as the weather and sales situationsat other stores to predict consumer demand for boxed
meals, sandwiches and other items and recommend
appropriate product offering and order quantities basedon the observed purchasing behavior of its over 96.71
million Ponta Card members (as of end August 2020).
This system, combined with our planned orderingsystem for beverages and processed foods, saves about
2.0 working hours/day per crew member.

2017

Tablets introduced into all the LAWSONIntroduction of digital tablets stores in 2017 have facilitated smooth

work procedures by displaying work
schedules in terms of “when, what andhow,” and by accompanying some tasks
with photos to assist less experienced
crew members. The devices have
improved productivity further byrecommending fast-food selections
and quantities based on sales data for
individual stores.

23
LAWSON INTEGRATED REPORT 20192020

Lawson Go(Demonstration
experiments initiated)2018This service allows customers to pay in advance automaticallywith a pre-registered credit card by holding the QR code
displayed on a dedicated smartphone app over a terminal at
the store entrance when they arrive, and then simply exiting thestore with their purchases after shopping. Cameras installed in
the store follow the customer’s movements, and sensors on thestore shelves detect and count the products the customer picks
up. Customers enjoy the new experience of shopping without
stopping to pay at a cash register, and stores benefit by saving
labor at the cash register and reducing opportunity loss during
peak hours.

Introduction of POS cash registers
with automatic change dispensers

2019

20XX

Introduction of a selfcheckout system

POS cash registers with automatic change dispensers have been installed in all LAWSON stores since
2018. Easy for both foreigners and seniors to use, the registers are reducing the burden on crew
members at checkout counters by eliminating the need to count cash received and paid out manually.
The working hours required for checkout and cash register inspection have been reduced by 1.5
hours/crew member. Since cash cannot be paid into or removed from the registers, moreover, losses
due to robbery are also decreasing. We took a further step forward in 2019 with the introduction of aself-checkout system.

Value creation story

Superior
taste

Lawson delivers a delicious life through astonishing products.

1 Original products with continuously evolving rich, delicious taste
Tomato hamburger with
16-grain rice

Cajun chicken with
16-grain rice

We are working every day at Lawson to plan and develop assorted original foods anddaily necessities that add richness and good taste to daily life through our familiar
community stores. Our product developers take their lead from analyses of point card
purchasing data and consumer input collected on social media. We deliver “superior
taste” suited to LAWSON community lifestyles with our original products, whichcurrently account for about 40% of the stores’ total sales.
We are especially particular about the quality and taste of our food productingredients. We have developed a colorful chilled box lunch product group that makes
optimal use of the ingredients’ taste. We augmented our standard lunch boxes in
2020, for example, by launching the new 16DELI series that blends rice with 16
grains in addition to meat and vegetables in an optimal balance. Our Machi-no Pan(“community bread”) series has produced one hit product after another through its
focus on superior-tasting bread dough and added ingredients aimed at creating “postconvenience store bag breads.” The new “GOOODOG” hotdog with tasty toppings
has become especially popular with hungry customers.
Since leading the way among convenience stores with the launch of thePremium Roll Cake in 2009, moreover, LAWSON has constantly attracted attention
with its commitment to sweets. Such sensational new products as our BASCHEE
Basque-style cheesecake with its unprecedented texture and taste owe their immense

GOOODOG
Tomato and onion

Machi-no Pan
French bread with milk
and butter

Machi-no Pan
2 pieces of French toast

Dora-motchi (red beanpaste & whipped cream)

popularity to product development with strict attention to texture, appearance andingredients. We continue to release hit products, including our Dora-motchi sweet
cakes with their superb tastes and textures and our CUPKE cake-in-a-cup series.
Machikado Chubo in-store kitchens are now operating in approximately 6,000
LAWSON stores nationwide (as of end August 2020). The kitchens offer foods suchas white rice, thick-sliced, deep-fried pork loin cutlets, and other delicacies, all freshly
cooked right on the premises with delicious taste born of the extra effort exerted intheir preparation.
In spring of 2020, we divided our Lawson Select brand products into twoseries, “L basic” and “L marche,” customers can enjoy at home. The brand logos andpackaging have been renewed with the cooperation of the nendo design office.

BASCHEE– Basque-style cheesecake –CUPKE
Melted cream andstrawberry shortcake

L basic

Machikado Chubo in-store
kitchen delicacies

24
LAWSON INTEGRATED REPORT 2020

Charcoal-grilled pork rice bowl

L marche2

Message

Foods that bring vibrant color to thedining table

Strategic product development anticipating emerging needs in themedium to long term
Launch of new systems that meet challenges with free thinking

With more people eating at home due to the COVID-19 pandemic, demand forfrozen foods that are easy to cook, delicious and reasonably priced is ascending
to new heights. LAWSON’s frozen foods are environmentally friendly products that
Tokekoro “melted” Afure Menchi
croquettes
minced-meat
create little waste by remaining unsold. The extremely rich lineup of original frozen
croquettes
foods includes noodle and rice dishes, side dishes that can be eaten just as they
are, and cut vegetables. Frozen products are also available under the NATURALLAWSON and Seijo Ishii brands.
In addition to our greatest hit Kara-age-kun chicken nuggets, which havegarnered sales of over 3.4 billion servings, the fast-food window at a LAWSON
counter sells fried foods, yakitori, oden and other popular side dishes for dinner andsnacks to accompany drinks. We added Tokekoro “melted” croquettes and Afure
GU-BO hot snack series
Menchi minced-meat croquettes to the menu in January this year and followed up
with GU-BO crispy snack pies, which became an immediate hit upon their launchin March. Other innovations include the newly added Cup Delica small-volume
cold side dishes that are perfect for sheltering at home. We have also expanded
our lineups of whole vegetables and fresh-cut vegetables to make the vegetables
customers need available at a nearby store. They appreciate the ability to purchasepotatoes, cucumbers, carrots and other vegetables in small quantities as well.

Nuts and half-day portion green& yellow vegetable salad

Mixed salad

Soft natto (fermented soybeans)with reduced odor

Simmered mackerel with miso

Salt-flavored stir-fried noodles
with shrimp and 6 vegetables

Lawson established the new Merchandising Concept Development Dept. in March
2020 to specialize in developing and cultivating strategic products that respondto medium- to long-term trends. The department’s mission is to grasp the latest
trends, respond to customers’ emerging values and needs, and move quickly andcontinuously to create delicious products that stimulate excitement as only Lawson
can. Every day is spent on developing products for the convenience store industry,where every week brings the birth of new products. In a workflow unlike thoseobserved by merchandisers in the various regular product departments, we conduct
thorough investigations in careful consideration of strategic products and series forthe future.
Every Product Concept Development Department member is expected toascertain the movements of society and changes in the latent and actual needsof customers, formulate hypotheses based on free thinking without limitation bypreexisting values, and generate strong concepts. The goal of this process is tostrengthen 11 categories of original products. We direct particular attention to
Lawson’s strengths in desserts andfast-food counter items in orderto enhance its reputation further.
Besides conducting marketing
training and workshops for ourteam members, we seek to solve
any problems that emerge throughcooperation with our manufacturers
and vendors and to offer customers
attractive product series they willlove far into the future. Our primary
goal is to make our franchise storesand our many customers happy.
Going forward, we will continue totake up the challenge of fulfilling
Lawson’s Three Promises.

Nobuhiro Tomonaga
Deputy Division Director, Merchandising Division
General Manager, Merchandising Concept Development Dept.

Coarse-ground wieners

25
LAWSON INTEGRATED REPORT 2020

Value creation story

3 Unique LAWSON store development responding to the demands of the community
SMARI
A new cashier-free shipping service that enables easy, speedy
package shipping with no face-to-face contact

Contributing to more beautiful,healthy and relaxed lifestyles

Providing good value centeredon 100-yen food products

The NATURAL LAWSON chain, which
has expanded to 146 stores nationwide(as of end August 2020), attracts
customers who insist on “health andbeauty,” “seasonality” and “safety andreliability” in daily life. Its agreeableinteriors offer a reliably relaxed
shopping experience. Customers relyon NATURAL LAWSON for carefully
selected delicious, healthful foods andenvironmentally friendly detergentsand cosmetics. They find that its
commitment to excellence provides
them with exceptional value.

LAWSON STORE 100 is a convenience
store-sized mini-supermarket witha stress on fresh foods. It provides
safe, secure, superior-quality fruits
and vegetables that are procured
and presented with fastidious carefor freshness and quality to meet
daily dietary needs. The 687 stores inoperation nationwide (as of end August2020) are patronized by customers
ranging from children to seniors, andespecially by singles and housewives.

Dandelion coffee jelly(decaffeinated)

Seijo Ishii offers a selection of high-appeal products
from Japan and around the world, all producedwith strict attention to delicious taste. Seijo Ishii’s
162 stores nationwide,* mainly in the Tokyo
Metropolitan Area (as of end August 2020), comein a variety of configurations, including roadsidestores and stores in station buildings, department
stores and shopping centers. The “grocerant,” a
new-concept in-store eatery that fuses dining withshopping, has proved highly popular. Most notably,
Seijo Ishii’s extensive lineup of imported foods,
carefully selected fresh foods, prepared foods andprocessed meat products manufactured by skilledcooks in its central kitchen, along with its many
original products brimming with unique delicious
taste, have received the support of customers whocare about high-quality food.
* Figures for Seijo Ishii include only directly managed stores.

Fried chicken

Sweet bean paste gipfeli

A high-end
supermarket offering acomplete assortmentof specialty foods

ShreddedcabbagePure-brewed
soy sauce

Le Bar à Vin 52

26
LAWSON INTEGRATED REPORT 2020

Entrance to a Seijo Ishii“grocerant”

LAWSON SMARI is a new sociallydistanced package shipping service that
permits customers to return rental or
e-commerce products without conducting
shipping or acceptance procedures at thestore counter. Instead, customers conduct
the simple procedures on their own andplace their packages in the store’s SMARI
box to be picked up by a delivery truck
on its return trip. Since its launch at a few
Tokyo stores in April 2019, the service
has been introduced to more than 2,000
stores in the Tokyo Metropolitan andKinki areas. Customers using LAWSON stores’ e-shipping service toship items sold on auction sites or flea market apps were formerly
required to hand their packages to a crew member after completingthe Loppi multimedia terminal and cash register procedures. Now
they can simply follow the easy SMARI preparation procedures at
a store offering the service and place their packages in a dedicated
SMARI box for collection by Japan Post.

Uber Eats
Bring your meals home without going to the store!
The first initiative of its kind offered by a Japaneseconvenience store
In a new last mile initiative to deliver products to customers’ homes,
LAWSON has become the first convenience store in Japan to offer
the Uber Eats service at some of its stores. We handle some 300
types of products uniqueto convenience stores,
including boxed meals,
rice balls, deep-fried foods
prepared fresh at the storeand desserts as well as daily
necessities and magazines.
In the year since Uber Eats
was first introduced inAugust 2019, the number ofstores offering the service
has expanded to over 1,000.

Superior taste

Tickets
Books &
magazines

CDs & DVDs

4 Fun life support / Entertainment 360°

ENTERTAINMENT 360˚Games

Lawson made entertainment-related
services a focus of its business in the
1990s with the goal of making people’s
lives richer and happier. We coordinate
operations with our Group companies
to provide 360° entertainment services
that are making us indispensable among
all Japan’s entertainment consumers.

Novelty items

Travelservices

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

Lawson Bank

ATMs installed at LAWSON stores nationwide accept the ATM
cards of nearly any financial institution. In fiscal 2020, besides
services that permit customers to charge smartphone payment
apps from their bank accounts using our ATMs and ATM payment
network, we introduced the ATM Charge service that enables themto charge the balance of payment apps with cash from an ATM
and the Smartphone ATM that permits deposits and withdrawals
via financial institutions’ apps without a card. Lawson Bank’s
easy-to-use services are making life increasingly convenient foreveryone.
As an added
bonus, customers who
shop with their Lawson
Ponta Plus credit card
receive preferential
treatment with Ponta
points.

The LAWSON Ponta Plus credit card system

Enhancing the movie-viewing
experience

Providing new experiences throughreal-world retail store shopping

Issuing tickets any time of day
at LAWSON stores

UNITED CINEMAS, Japan’s third-largest
cinema complex provider, operates 43
theaters with 389 screens nationwide (asof August 2020). We offer community
residents various new ways to enjoy
movies besides standard screenings,
beginning with the state-of-the-art IMAX
Laser*1 screening system introduced in
Okinawa Prefecture in June 2019 andincluding the 4DX*2 and SCREENX*3 film
formats. We are also pursuing various
avenues toward leveraging cooperation
among Lawson Group companies touse our theaters for purposes such as
screening of video content other thanmovies, or as venues for promotional andmarketing activities.

Lawson Entertainment operates 57
stores nationwide (as of end August2020), beginning with HMV, one ofJapan’s largest-scale music andvideo software specialty stores, which
includes a composite store specializing
in books and a record specialty store.
Besides housing the permanent hmv
museum exhibition space, the stores
host "seasonal" events presenting
contents such as music, movies, art andanimation, thus providing a venue forentertainment experiences that can beenjoyed nowhere else.
Lawson Entertainment also
conducts a diverse range of otherbusinesses such as the HMV flat-ratemusic-streaming service, 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 EC (e-commerce) site. We
are currently working to expand ourbusiness domain further to include
planning and production of live events,a paid membership business, a fan clubenrollment agency, and entertainment
tour planning and sales.

*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 to provide
a cinematic experience that transforms “watching”
to “experiencing”*3	A panoramic multi-projection movie screening
system that uses the theater’s side walls as wellas its screen

27
LAWSON INTEGRATED REPORT 2020

Value creation storyHumankindness

Generating smiles in the community

1 Advancing the theme of “Eat deliciously and improve your health”
Evolution withhealth needs
2000
Early period
NATURAL LAWSON(established 2001)

2010
Period of creation
Launch of bran bread(2012 onward)

Launch of onigiri riceballs with sticky barley(2012 onward)

Launch of smoothie
series (2015 onward)

Lawson has established 11 unique themes, including “Eat more vegetables,” “Getyour protein” and “Enjoy low calories” as action strategies aimed at realizing its three
keywords for health: “Lower salt,” “Lower carbs” and “Reduced additives.” We are
implementing these strategies by developing a variety of products that contributeto our customers’ health. With the advent of the rapidly aging society, increase inlifestyle-related diseases and reported growth of the burden of medical expenses,
extending people’s healthy life expectancy has become a social concern. As the needfor ready-to-eat meals has increased due to the home-centered lifestyles dictatedby the COVID-19, meanwhile, we recognize our responsibility to create smiles in ourcommunities by providing an assorted lineup of prepared foods that families can enjoy
with peace of mind.
We began by conducting new product demonstration experiments at about 140
NATURAL LAWSON stores nationwide, and then expanded the program to LAWSON
stores across Japan. This approach has been applied not only to developing products
for customers concerned with sugar intake, but also to renewing our widely popularbran bread, onigiri rice balls with sticky barley, and smoothie series with even more of
the delicious taste customers love. Healthful frozen foods with their dietary fiber andsugar contents indicated on the packaging are among other popular new products.

We are now working to add more products to our healthful foods category,
which has seen sales escalate from about 20% of total sales in fiscal 2015 to about
30% in fiscal 2019. Efforts to expand this product lineup will continue in the future. As
concerns low-salt products, we are pursuing such initiatives such as introducing newtechnologies to maintain superior taste by applying our know-how in bringing out thedelicious flavors inherent in the soup stock, other ingredients and seasonings we use.
We employ soybean meat in products as appropriate.
Beginning in fiscal 2020, moreover, we have taken up the challenge ofdeveloping seasonings without salt or chemicals that will change the conventionalview of convenience store foods. We followed our successful launch of dal andcoconut chicken curry with brown rice at NATURAL LAWSON in March with therelease of dal and cashew chicken curry with brown rice at LAWSON stores in theTokyo Metropolitan Area in June. We optimized the superior taste of the ingredients inthese new curry products without the use of salt or chemical seasonings.
The conventional image of convenience store boxed meals has changed
dramatically as consumers have come to consider LAWSON’s boxed meals reliably
superior. We will continue to take on challenges to assure the health and safety of
everyone in our communities.

Lawson’s Three Essentials for Health

Lifestyle diseases (excessive carbohydrate or salt consumption)

Needs for healthy life extension

Lawson’s Three Essentials for HealthLow salt

Low carbs

Low additives

2018
Period of growth
Launch of Motto! Yasai(“more vegetables”)
series (2018 onward)

Dal and coconut chicken curry with brown rice

30% (max.) reduced saltcontent centered on main
normal diet staples

Use of bran (grain husks) tocontrol carbohydrate intake

Chemical flavoring-free frozen
foods (selected products)

28
LAWSON INTEGRATED REPORT 2020

Dal and cashew chicken curry with brown riceSupporting healthy diets at LAWSON Farm

2 Supporting a healthy community life
Care-focused LAWSON storeswith nursing care consultation
desks for seniors
Health consciousness has been
advanced through the operation ofCare-focused LAWSON stores offering
consultations by counselors such ascare managers at permanent nursing
care consultation desks and productsthat support seniors and their families.
We also use their community salons asregional bases for multi-generational
interaction to hold health assessment
meetings, “Orange Café” dementia
caregiver training courses and otherevents related to health and preventative
care.

Crew members who havequalified as “registered sales
clerks” provide customer
consultations concerning
medicines
Every store that carries OTC drugs
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 for themselves or family
members. Registered sales clerks
inquire about their physical conditionand symptoms and recommend themost appropriate medicine. Associatedproducts such as cooling gel sheets,
beverages and easy-to-eat foods areavailable for purchase at the same time.

Hospital LAWSON (in-hospital)
convenience stores
Lawson has responded quickly to theneeds of hospital patients by leading
the industry in locating convenience
stores in Japanese hospitals. Besides
regular products and services, Hospital
LAWSON stores feature a lineup of
products designated by hospitals. We
also cooperate with individual hospitals
in developing customized stores andservices such as hospital wagon
sales. Recognizing the hospital as acommunity in its own right, we seek the
daily happiness of every hospital patient
by giving careful consideration to theirdetailed needs.

*1
In its efforts to assure
LAWSON stores a stablesupply of vegetables andfruits that support thehealthy eating habits of ourcustomers, the Lawson Group has established
LAWSON Farm, a corporation eligible forfarmland ownership with member farms at 18 locations nationwide.
LAWSON Farms employ the Nakashima method of farming, which involves
conducting soil diagnoses to develop ideal soil for growing crops before
planting and supplies appropriate nutrition according to the growing
conditions to produce healthy, delicious vegetables and fruits. We are also
working to satisfy the GAP (JGAP, ASIAGAP)*2 guidelines for sustainableagricultural production through efforts in the areas of quality improvement,
food safety and environmental protection.
*1	The registration number
Certified Nakashima method products
inscribed below the JGAP
from Lawson Farms nationwide
certified farm mark is theFarm name
Certified productnumber for LAWSON Farm
Japanese mustard spinach
Chiba.
Lawson Farm Chiba(rape), spinach, radish, carrots,*2	GAP: Good Agricultural
cabbage
Practice (agricultural
Lawson Farm Tokachi
Potatoes, carrots
production process
Lawson Farm Yamanashi Peaches, Kyoho grapes
management). LAWSON
Lawson Farm Aichi
Cabbages
Farms accorded GAP
Lawson Farm Hyogo
Onionscertification have attained the Lawson Farm Tottori
Daikon radishes
Japanese JGAP standard
Lawson Farm
Lettuceor international ASIAGAP
Ichikikushikino
standard.
Lawson Farm Satsuma
Cabbages

Rainforest Alliance
Consideration for society and the environment
Using only beans from Rainforest Alliance certified
plantations* atios of convenience store chainsR
operating in-store hospitals

A nursing care consultation window in a Care-focused
LAWSON for senior citizens

Other
chains55%

Lawson45%*Data based on survey results compiled by Lawson(as of August 2020)

29
LAWSON INTEGRATED REPORT 2020

The MACHI cafés inside LAWSON stores seek
to protect the human rights of coffee producers
and workers by sourcing beans only from
Rainforest Alliance-certified coffee plantations
that use natural resources and environmentally(“machi”) friendly farming methods. Rainforest
Alliance certification is granted to farms thatadhere to more sustainable farming practices
and meet strict environmental, social andeconomic standards.
*	Not applicable to single origin or decaffeinatedseries.

Value creation story

3

Reinforcing support for franchise stores

In the role ofmanagement owner (MO)Business management

Multiple storesSC

3 store managers
Average number(store consultant)

SC

Regional society
Socialcontribution
activities

Abundant
product
lineup(store consultant)

Making rounds and providing Making rounds and providing
crew at 4 stores
Lawson Headquarters’ closest, most strategic partners are theMultiple stores Lawson hasofestablishedthe original
guidance toManagement
individual stores guidance to Ownerindividual stores
1 store manager
Approx. 60
numberAverage
No.openof stores managed:10
franchise owners and store crews who serve customers on theofAverage(MO)systemtosupportfranchiseownerswho
additionalcrew at 2 stores
Average No. of SCs: 2
Single store
forefront in communities throughout Japan. Average number
Approx. stores
30
based
on
a
reinforced
partnership
with
Headquarters.
of crew
If they are to serve as refreshment hubs Approx.
in our15
The MO system is making a substantial contribution to thecommunities where people gather with a smile, LAWSON
progress of the LAWSON chain as a whole, not only by
franchise stores must be active and energetic. Headquarters
enhancing the brand image of the Lawson chain throughcontributes by supporting their recruitment activities anddevelopment of model stores and sales floors, but also by
optimizing their benefit packages, as well as by reinforcing
providing a platform for MOs to advise other owners on store
various initiatives and systems to encourage sound store
management as well as to exchange opinions or propose
management through clear, open communication.
improved work procedures to Headquarters management
Lawson recommends, moreover, that its franchise owners
personnel as representatives of the franchise stores in theiroperate more than one store. This enables them to spread theregion. As of end February 2019, there were approximately
risk posed by the emergence of new competing stores, so that
190 MOs operating stores in various regions of Japan.
they can maintain stable management while expanding their
We will continue our efforts to become an indispensablebusiness more easily than when operating a single store.
part of the community infrastructure by building an even closer
In February 2020, Lawson amplified its efforts to promotepartnership with these franchise stores and by reinforcing such
multiple-store management by establishing an education/near- to mid-term initiatives as supporting our less profitabletraining system to enhance financial support and encourage
stores and encouraging multiple-store and new franchise store
a transition to multiple-store management by franchise storesownership — in addition to the franchise management support
under single-owner management that were facing a difficult
measures implemented so far.
business environment.

Franchise
storesNew
services
development

Role of theManagement Owner (MO)Business management
SC

40

40.8

42.3

44.7

Multiple stores
3 store managers
Average numberof crew at 4 stores

Approx. 60

44.8

Multiple stores35

1 store manager
Average numberof crew at 2 stores

30
0

2015

2016

2017

2018

Approx. 30

2019(Fiscal year)

Multiple store ratio *As of end February 2020
Single store

Single store

24.6%

Average numberof crew

Multiple stores

75.4%

30
LAWSON INTEGRATED REPORT 2020

SC

(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: 11
Average No. of SCs: 2

(%)
50

40.5

LawsonHeadquarters

Environmental
activities

Multiple store ownership ratio *As of end February 2020

45

Joint business operations

Approx. 15

Human kindness

New measures to stabilize franchise store management (effective fiscal 2020)

for underperforming stores(Target stores: Approx. 1,200 stores)
Target stores with single-store
management
One-year (2020) limited support

Multi-store management
support measures

Additional 40,000 yen/month support

Target stores achieving
multi-store management
within one year

Policies in support ofunderperforming stores

1.	Support to help struggling franchise stores with single-store management as they transition to multi-store
owner management
40,000 yen/month support
2-year extension +1.5 million yen incentive bonus(Existing) multi-store management
incentive bonus: 1.5 million yen—largest in CVS industry

2.	Support for store manager training
3.	Contract matching
As a rule, Lawson is happy to provide guidance concerning existing stores for potential new owners.
After confirming a candidate’s intention to undertake LAWSON store management, we proceed with
contract signing and opening of the new property.

Existing stores

Existing stores

Directly
managedstoresOlderfranchise
storesChangein format

Confirmation of the candidate's intention to undertake
management before completing a new property contract
OPEN

Pre-existing
management
base(Stores with
expiring contracts)

New franchise stores
Initiation of business

Headquarters
Selection of newstore property
candidates

Lawson has established a number of systems aimed at strengthening its partnerships
with franchise stores by enabling members of the Board of Directors, including thePresident, to communicate directly with franchise stores. We place special value on
feedback from our franchise stores, which operate in direct contact with customers, andseek to achieve mutual consideration and mutual prosperity withthem through close communication. In fiscal 2020, we have takensuch measures as a change to online meetings to prevent further
spread of the COVID-19.

Lawson Seminars (convened twice annually for all franchise stores)

Headquarters employees provide direct support for cultivation of multi-store managers.

Safe management by stores with visible performance results

Communication to build strong partnerships with franchise stores

Existing
Headquarters
franchise stores
New property
Confirmation of intention
contracts
to undertake management

Open

The President and other members of management share the Company’s
policies and directions with the franchise owners by providing them withdetailed explanations of future business strategies, and informing them of
product development planning in conformance with the policies.

Seminars for franchise
stores are held
nationwide.

Area meetings (convened monthly at branch offices throughout Japan)

Franchise stores from the same areas gather to share details of sales activities planned for thefollowing month as well as of their past successes, or to exchange opinions with the aim of helping
individual stores improve their management capabilities.

Lawson Owner Welfare Association board meetings (2 times/year)

Meetings of Headquarters executive officers and representatives selected from among franchise(FC) owners in each area convene twice a year. Organized to provide FC owners with opportunities
to exchange opinions with Headquarters, the meetings are attended by the President and othermembers of Lawson’s Board of Directors, who join in discussions covering a range of issues.

MO General Assembly (1 time/year)/MO Executive Committee meeting (2 times/year)

4.	New five-year contract packages
We will establish a new five-year contract package system for potential owners who feel uncertain about signinga ten-year franchise agreement. Adoption of the new package will be a matter of choice. (Introduction within2020 scheduled.)

5.	Change to store profit-based management system
The Company’s overall management target will be changed from Headquarters sales to franchise store profits
in a move intended to reflect Headquarters’ primary concern for the franchise stores’ profitability, and to ensurethat every Lawson employee works more responsibly than ever before to achieve it. The KPI (key performanceindicator) for employee bonuses will also be changed to franchise store profits.

6.	FC owner support system
Approximately 100 Headquarters employees will be assigned to eight locations nationwide to support franchise
store owners who take vacations. (Effective mid-September 2020)
Besides implementing the above measures, Headquarters is responding to the impact of the COVID-19
pandemic on an individual store basis by providing management support for stores whose customer traffic andsales have fallen off significantly. Our approach is to support stable management according to the situation.

31
LAWSON INTEGRATED REPORT 2020

Lawson’s management owners meet regularly with Headquarters management to exchange opinions
as representatives of their regional franchise stores in accordance with Lawson’s Group-wide practiceof participation in management.

Lawson Owner Hotline (as needed/available to all franchise stores)

In July 2019, Lawson established a system of both internal and external telephone consultation
contacts (in law offices) to enhance communication with franchise owners.

We also provide for direct communication with the President (as needed) and conduct
questionnaire surveys at member stores (once a year).

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 “peaceof mind.” The wide range of benefit packages includes various allowances,mutual aid and compensation for franchise owner members and theirfamilies as well as for store crew and staff members.

Value creation story

4

With Lawson’s Way as the cornerstone, we will build a “Lawson whose personnel can continue
working cheerfully and happily with lively, positive energy”

Promotion of diversity and realization of awork/life balance

pursue these initiatives with the aim of increasing the proportion of
female employees among those in management positions to 30% by
fiscal 2020.
Lawson encourages male employees to take their childcare
leaves, moreover, in hopes of inspiring active male participation inchild-rearing and housework leading to efficient, highly productive
work styles among both men and women. The ratio of fathers taking
childcare leaves exceeded 90% in fiscal 2018 and 2019, indicatingthat this practice is taking root in Lawson’s corporate culture.
We introduced a flexible full-time (limited work location)
employee system designed for compatibility with obligations such as
childcare, long-term care and cancer treatment in 2018, moreover,and raised our employee retirement age to 65 effective March 2020.
Plans are also in the works to introduce an active full-time senior
employee system to help transform Lawson into a company whose
employees can continue working with satisfaction later in life.
Other initiatives we are implementing or investigating include arewarding work reformation project, remote work programs realizing
various work styles and a cross-Company mentor system as well as
fostering of a culture of positive reinforcement to enable employees
to continue working and growing energetically over the long term.

	Creating work environments in which diversified
personnel work enthusiastically
Lawson promotes diversity with the aim of assembling employeeswith widely varied values who join together and perform to theirfull potential to strengthen its franchise chain further. We haveconstructed systems for promoting diversity under the directionof the President, established a special subsidiary to promote
employment of people with disabilities, developed childcare facilities
in our workplaces, and opened offices for conducting labormanagement consultations with a focus on improving operating
efficiency and work environments.
We continue to pursue active efforts to recruit women andforeign nationals as regular employees, while broadening the scopeof our international 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
Acquisition of special
Platinum Kurumin
certification forcompanies withexcellent childcare
support programs

Eruboshi (Level 2)accreditation as acompany with large
numbers of female
employees active on
the front lines atio of male employees taking
Rpaternity leave
No. of paternity leaves (left axis)
Ratio of paternity leaves (right axis)
92
91(Persons)
150

80

80

70
100

16
0

23

93

94

109

112

136

 roportion of working mothersPamong female employees(Persons)

100

250

80

200

60

150

40

50

0

(%)

50

0

0

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

16.0

100

20

2013 2014 2015 2016 2017 2018 2019
(Fiscal year)

Recognition as an enterprise displaying
outstanding performance in health andproductivity management by the 2020
Certified Health & Productivity Management
Outstanding Organizations Recognition
Program organized under METI

21.2 21.9
16.717.8

24.5 24.2 24.4

 roportion of female employeesPin management positions
(%)
40

140

35

120

30
25
20
15

No. of female employees in management positions (left axis)
Ratio of female employees in management positions(%)
to all employees (right axis)
10
9.5
10.1
8.3
7.9
8
7.0
6.6

(Persons)

100
80
60

10

40

5
10 23 67 91 107 128 151 182 202 219
02001 2005 2010 2013 2014 2015 2016 2017 2018 2019
(Fiscal year)

20

8.4
4.6

Childcare leavepromotion posters
displayed in every
office

4.9
3.8
2.8
0.9

5.6

Diversity Promotion System

2

26 37 52 63 76 75 92 103120 127
0 8
02001 2005 2010 2013 2014 2015 2016 2017 2018 2019
(Fiscal year)	Cultivating human resources who think and act on theirown initiative
Guided by our Group philosophy, we encourage every employee tothink and act independently by employing two evaluation systems:
the Employee Behavior and Skill Level Evaluation, which evaluates
the employee 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 careerplan based on a career development sheet, and follow up by
conducting career development interviews to support their growth
as individuals.
In fiscal 2018, we discontinued the internal award system
we had implemented to honor employees who addressedchallenges voluntarily and achieved results in terms of operationalor business performance 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 totake up challenges to improve work procedures and conditions
from a Companywide perspective, beyond the scope of theirown responsibilities, thus sharing their knowledge with others
throughout the Company as a means of enhancing employee
motivation and improving the business performance of the
LAWSON store chain as a whole.

President
Marketing Strategy
Division

64Implementing a nurturing personnel
management system

Marketing Team

Director,
Human Resources Division
Human Resources Division
Diversity Promotion Officer
Diversity TeamGenki Leader Committee
Operating under the President’s direction, the Human Resources
Division takes responsibility for system design, operations andappointments, while the Marketing Strategy Division seeks to create
new value from ideas generated by female employees.

32
LAWSON INTEGRATED REPORT 2020

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

Human kindness

Message
We will create environments where everyone can work independently
and energetically by sharing the principles advocated by the new“Lawson’s Way” code of conduct.

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 work-related accident occurs, we investigate
and analyze the cause and share our findings internally with the aim ofpreventing recurrence.
Also in the area of work environment improvement, we focus onsuch mental health monitoring activities as presentation of improvement
points and stress check results for the various departments.

Health initiatives for employees and franchiseowners	Recognizing health as the foundation for happiness.
As a company that contributes to customers’ overall health, Lawson
places paramount importance on the health of our employees andthe owners and crews of affiliated stores as well. In his role as CHO(Chief Health Officer), the President announced a health declaration
to this end in 2013. We have recently established the Community
Health Hub Promotion Committee comprising the general managersof every department to promote health management and lead efforts
to reinforce and direct health initiatives and health management for
the Company and its customers. Since September 2018, we havebeen working to strengthen Groupwide health promotion measures incooperation with the Lawson Group Health and Wellness Promotion
Center, a body operating under the direct supervision of the President,
the Human Resources Division, management and labor, and theLawson 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 page31) include a subsidy plan for medical examinations and operation of ahealth support desk.

Conducting interviews with industrial physicians andpublic health nurses to support employee health

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

Human
Resources
Division

Lawson Group
Lawson Health
Health andInsurance
Wellness
Promotion Center Association

Lawson has established a new code of conduct, the “Lawson’s Way,” to pursue realizationof our Group Philosophy, “Creating Happiness and Harmony in Our Communities.”
Serving as action guidelines for all Lawson personnel, the Code clarifies roles andinduces a strong awareness of our shared mission and responsibilities to ensure thateveryone from Headquarters’ employees to personnel who interact with customers daily
are all working toward the same goal. The five basic principles of the Lawson’s Way areshared among Lawson people in every position, from supervisors*1, merchandisers*2 andRFC*3 to leaders and owners. We ask the opinions of affiliated store owners and crews
nationwide concerning proposals from the officers of various departments, and draw ontheir input to finalize procedures suited to each particular site. This approach simplifies
procedures and makes them easily understandable for anyone. Their implementation
begins this year, with our corporate officers leading the way with tangible action basedon the Lawson’s Way. The five basic principles are particularly important to these efforts
due to their simplicity. We consider them essential to understanding the nature of the
LAWSON store as a community hub.
We continue working at the same time to optimize the Company’s working
environments to enable employees to work energetically and cheerfully. Empathizing withour colleagues, vocalizing our ideas, and enjoying every little challenge, we will contribute
through our actions to enhancing customer satisfaction and increasing profit margins at
LAWSON stores. We will spare no effort to ensure that these accumulated activities create
greater happiness and harmony throughout our communities.
*1	SV (Supervisor): StoreManagement Instructor*2	MD (Merchandiser): Person in
charge of product development*3	RFC (Recruit Field Counselor):
Person in charge of store
development

Katsuyuki Imada (right)
Member of the Board
Senior Executive Managing Officer
Division Director, Corporate
Strategy and Planning Division
Human Resources

Eri Yanagida (left)
General Manager, Human
Resources Division

33
LAWSON INTEGRATED REPORT 2020

Value creation story
Human kindness

5 Supporting the activities of the women, children and seniors in our communities
Social initiatives
Helping people during the
COVID-19 pandemic
All of us at Lawson are working to protect
everyone in our stores from infection by
the COVID-19. We are also conducting
various activities to support people who
are facing difficulties day after day.
In March 2020, we distributed riceballs at no charge to schoolchildren
in childcare facilities in 47 prefecturesnationwide who were without theirschool lunches due to the temporarily
school closure. This program involveddelivering 584,983 rice balls to a total of
7,163 facilities and 307,332 children overa three-day period. We also expressed
our concern for children with limited
space to play at home during the closure
by holding a free “Enjoy Coloring with
Lawson” cartoon page coloring/printing

event using multifunction copiers at thestores from March to April. All the many
participating children had a wonderfultime.
The COVID-19 pandemic exerted
a formidable impact on the Japanesefood scene as well. We responded bydeveloping Miruku Mushipan (“steamed
milk bread”) using milk intended forschool lunches whose consumption has
decreased, for sale at approximately
2,400 stores in six prefectures in the Kinki
region. A plan to use highway buses totransport fruits and vegetables that had
been slated for sale at Mashiko Road
Station theme park in Tochigi Prefectureand sell them at five stores in Kanagawa
Prefecture during the park’s closure also
met with a positive reception.

Fund-raising activities
organized at the stores togenerate happiness in theircommunities
We established the Lawson Group’s“Happiness in communities” Fund-raising
campaign to realize the concept “Aiming
to create a better future for children.”A total of some 7 billion yen (as of end
February 2020) has been collected
since September 1992 through in-store
donation boxes and Loppi multimedia
terminals, and from Ponta point andd-point donations.
We also pursue activities suchas measures to prevent COVID-19
infections, and accept donations for
emergencies such as earthquake andtorrential rain disasters year-round.

Community Happiness donation activities
Support Dreams Fund
(Scholarship program for children from single-parent families)

National Federation of Single Parents and Children’s
Organization
receiving donations Welfare Associations in Japan

This scholarship program wasestablished to provide support tochildren in single-parent families
who wish to realize their dreams.
30,000 yen is provided to 400 3rdyear junior high school and highschool students on a monthly basis.

Lawson Green Fund
Organization
receiving donations The National Land Afforestation Promotion Organization

We support school afforestation activities
conducted in primary/junior high schools
and special needs schools throughout
the nation, and also support forest
improvement projects led by voluntaryorganizations. The number of projects
joined by franchise owners and others is
1,537 as of the end of February 2020.

“Dream Classes” Fund
Organization
receiving donations Public interest corporation: Japan Football Association

We support the “Dream Classes”
where athletes talk to children
about the importance of having
a dream. Approximately 570
students of 18 classes in eightschools have participated in the©JFA“Dream Classes” since the project
was launched in 2019. (For details, please see the right column.)

34
LAWSON INTEGRATED REPORT 2020

Environmental(Machi)friendliness

Lawson takes up challenges repeatedly in its commitment toparticipating in the local community and realizing a carbon-free society.

1 Providing the community with convenience, safety and security through our stores
Community revitalization agreements with local governments
Having concluded comprehensive agreements with local governments throughout Japan, Lawson is collaboratingwith them in programs aimed at revitalizing local communities and creating community environments in which
everyone can lead a comfortable life. As of the end of June 2020, we were cooperating with 65 local governments(45 prefectural and 20 municipal governments) in a wide variety of projects. The list includes welfare and childrearing support such as provision of hot water for baby milk, product development
leveraging use of local specialties and seasonal ingredients, crime prevention
activities, environmental improvement through greening and cleaning activities, anddisaster response measures such as supply procurement and provision of support
for people who are stranded away from home. In addition to all these, some stores
have formed tie-ups with local governments to serve as antenna shops to promote
recommended local products and provide tourist information.

Delivering shopping excitement to customers Mobile sales services
We visit marginal villages, elderly facilities, companies,
factories, etc. in remote areas from our stores bymobile sales vehicle to sell food products, daily goods,
and assorted items there. As part of our “community
watch service,” we spontaneously communicate
with senior people using our mobile sales services
in collaboration with local governments and others.
Lawson delivers to customers shopping excitement aswell as products.

Easy, convenient procedures for obtaining insurance
Community residents can easily apply for insurance using an in-store
Loppi multimedia terminal at a nearby LAWSON store. They canobtain single-day automobile insurance for as little as 500 yen a day
when planning short-term motor vehicle use, for instance, receive
motorcycle liability insurance along with a license plate validation
sticker on the spot, and even obtain bicycle insurance, which is now
becoming mandatory throughout Japan. Whenever a customer takesout one of these three types of insurances, one yen from the premiumis donated to a non-profit organization for the support of children
orphaned by traffic accidents and other transportation-related events.

Administrative services available at Lawson
Customers can get various forms of government-issued documents with the My
Number Card, or Basic Resident Register Card at Lawson stores throughout
the country. Currently, this service is available in 749 cities, wards, towns, andvillages (as of July 6, 2020) accounting for 70 to 80% of the nation population.
The in-store multi-functional copier can be used to print out copies of residence
certificates, seal registration certificates, tax payment certificates, family register
certificates, copies of supplementary family register etc.**The public services available at Lawson stores vary depending on the local municipality

Participation in Safety Station activities
The convenience store industry has faced a growing number of demands from society in recent years for actions acrossthe range from crime prevention, disaster response and safety measures to sound, healthy development of young people.
The Lawson Group is responding by participating actively in the Safety Station activities (SS activities) of theJapan Franchise Association, cooperating with efforts to implement safe, secure community development, and working
to ensure a wholesome youth environment. We are also taking measures to prevent robbery and special fraud, protect
women and children who feel threatened, and safeguard confused elderly residents who wander away from home.
Lawson’s pursuit of these efforts earned commendations from local police for 392 instances of special fraud prevention
at its stores in fiscal 2019.

2019 response status
Sheltering frightened women
Sheltering frightened children

1,163 stores

At least 1,636 instances

560 stores

At least 829 instances

Safeguarding seniors

2,166 stores

At least 3,881 instances

Preventing scams (wire fraud, etc.)

1,916 stores

Encouraging young people to go home duringlate-night hours

7,802 stores

35
LAWSON INTEGRATED REPORT 2020

Value creation story2

Launching the “Surprise ‘Whew!’
kindness project” to promote
environmentally-friendly lives

Concern for the global environment is one of the most pressing
issues facing us in today’s society as we look to the future.
Lawson initiated this environmental friendliness project inJuly 2020 with the aim of alleviating environmental problems
by proposing “Earth-friendly (community-friendly) living” while
responding to innumerable requests from customers.
Lawson’s efforts to contribute to the SDG vision include
promoting efforts to address environmental issues by suchmeans as lessening the use of plastic shopping bags,
containers and packaging; cutting food loss; and reducing CO2
emissions, while achieving Lawson’s 2030 targets (KPIs).

Surprise

3 Reduced use of plastics
Goal for2030 (KPI)

Plastic containers and packaging
Reduction of 30% from 2017

Reducing plastic use for packaging
We strive to replace plastic packaging items with paper ones, and reduce the volume of plastic waste while retaining the taste andquality of our original products. Also, we are committed to reducing plastic use by utilizing plastic packaging items partly made fromplant-derived materials.
Switching to paper cups for MACHI café iced coffee (Size S)

Switching to paper containers for all original
yogurt drinks• Switching to paper cups from plastic ones
•	Switching to lids with a sip-thru hole that allows customers todrink their beverages without the need for a straw•	Changing the containers of all products from plastic topaper (excluding the lids)•	Switching to straws containing plant-derived materials

MACHI café

NATURAL LAWSON

Changing the wrapping materials for rice ball products

Selling boxed meals using paper containers•	The specifications of plastic materials have been changed for the wrapping of
all hand-rolled rice ball products, some directly wrapping rice ball products,
and one rice ball product sold with other products in a bundle. The existing
plastic materials have been replaced with those containing plant-derived
materials, and the thickness of the wrapping sheet has also been reduced•	Reducing plastic use by 70% (approximately18g) per
container compared to plastic containers“Whew!”
kindness

Changing the wrapping materials used for sandwich
products (all triangular-shaped sandwich products)

Goals for 2030 (KPI)•	Reducing plastic use for wrapping by approximately 0.3g per
product in addition to changing the package to a simpler design

Reducing plastic
Plastic for containers
and packaging

Reduce by30%

Lawson’s original
products Eco-friendly
materials

v. 2017 levels
Reducing food waste

50% used

50%

Redesign of original cold drink containers•	Reducing plastic use by removing the plastic lids from thecontainers

Plastic shopping bags

Reduce by100%

Reducing CO2 emissions
CO2 emissions per store

Reduce by
v. 2018 levels(Adoption of original product packaging
using 50% eco-friendly materials)

Reduce by
v. 2013 levels

30%

Switching to recycled PET material-based containers for chilled noodle products•	Changing the plastic materials used for some types of chilled noodle containers from standard PET materials
to those containing recycled PET materials made from collected PET bottles

Charge for plastic shopping bags
Effective July 1, 2020, it is mandatory for stores throughout Japan to charge for plastic shoppingbags as part of the national policy of preserving the global environment. Besides complying withthis policy by charging for shopping bags, Lawson is producing bags with a mix of approximately
30% plant-derived materials to reduce the use of plastics. We have been working since fiscal
2007 to popularize reusable bags that hold a PET bottle and a boxed meal neatly with theaim of encouraging customers to bring their own bags. As of fiscal 2019, we had distributed
approximately 5.41 million of these innovative bags.

36
LAWSON INTEGRATED REPORT 2020

Environmental (Machi) friendliness

4 Reduced food loss

5 Reduced CO emissions

Recycling of unsold food
The daily volume of unsold food products, and that of the foodoil (oil waste) used for deep-fried food products is 5.9 kg and2.5 kg, respectively at one Lawson store.
In order to reduce food waste, we optimize the number ofpurchases, offer discounts to sell up, and deliver unsold foodproducts to recycle plants to have them recycled for feedstuffs
or fertilizers. Oil waste is also recycled for nutritional additives
to feedstuffs, biodiesel, etc. The recycling ratio of food andother waste achieved through these efforts reached 50.2% in
fiscal 2019.

Introduction of CO2 refrigeration systems
Lawson employed highly energy-efficient CO2 refrigeration
systems in 2010. Approximately 3,700 stores have installed thesystems (as of the end of February 2020). These systems use
CO2 refrigerants whose impact on global warming is said to beabout 1/4,000 compared to CFCs, and therefore can materiallyreduce greenhouse gas emissions. Also, they are very
energy-efficient, and can reduce electricity use by 12% perstore.

Goal for2030 (KPI)

Reduction of food waste by 50%
from 2018 level

2

Goal for2030 (KPI)

Reduction in CO2 emissions per store by 30% from 2013
Implementation of “Ten Energy-saving Rules” at the stores
Lawson has established the “Ten Energysaving Rules” to improve the operational
efficiency of in-store refrigeration and airconditioning systems, and reduce the total
amount of electricity used. Based on theserules, we perform maintenance duties
such as adjusting the set temperature, andcleaning filters at each store.

CO2 emissions generated by our supply chain for fiscal 2019
CO2 emissions in total Approx.

CO2 refrigerant cooling/refrigeration system onating the surplus stock of original products on aD
regular basis
Lawson has periodically donated to the Japan Food Bank
Promotion Group original sweet products, processed foods*,
etc. that missed the delivery deadlines to stores since August
2019. The number of products we have donated is about
155,000 in total as of the end of April 2020. The donatedproducts are delivered to food bank bodies across Japan,
from which they are provided to families who need food aid,
Children’s Cafeterias, orphanages, facilities for the disabled, etc.

Gasoline consumption of company vehicles (Scope 1*2) 0.08%[4.5]Deployment of eco-friendly model stores
Lawson established eco-friendly model stores equipped withleading-edge technologies. We introduce to new stores only
the facilities that have been proved to be highly energysaving
and energy creation by the tests and verifications conducted atthese model stores. At the model store that was launched on
Keio University Shonan Fujisawa Campus in September 2019,
all the refrigerators and freezers available there are CFC-free.
It is the first Lawson store to have all its refrigeration systems
CFC-free.

*Food products are delivered for donation much earlier than their best-before
dates.

5,712.2 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).

Electricity consumption of the headquarters, regional offices, branches,and company-operated stores (Scope 2) 0.41%[23.2]
Business trips (Scope 3) 0.02%[0.9]In-store waste, and industrial waste due to store closures and remodeling (Scope 3)

0.44%[25.3]

Disposal of containers, chopsticks, and plastic shopping bags (Scope 3)

1.05%[59.8]

Electricity consumption associated with procurement of electric power (Scope 3)

1.41%[80.3]

Energy consumption of the delivery centers (Scope 3) 1.76%[100.7]

Electricity consumptionof the franchise stores(Scope 3)
Raw materials
purchased
19.33%(Private and[1,104.2]
national brandproducts, plastic
shopping bags, etc.) (Scope 3)

Changing the company car for the Supervisor (SV) toan EV made it possible to create a two-way power
flow between the EV and the store by only connecting
the EV to the EV charger with no need for in-store
operation

37
LAWSON INTEGRATED REPORT 2020

75.50%[4,313.3] *1*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 creating new Lawson in the new era

Reinstatement

Reinstatementof the Board
Katsuyuki Imada Member
Senior Executive Managing Officer
Years on Board: 3

Years on Board: 3

Reinstatement

Satoshi Nakaniwa

Yutaka Kyoya

Division Director, Corporate Strategy and Planning Division
Human Resources

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

Member of the Board

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

In addition to experience in the employ of Mitsubishi Corporation,
Satoshi Nakaniwa has extensive experience, having been responsible
for Lawson’s finance and accounting, business risk management,
investor relations (IR), general affairs, and purchase management.

Yutaka Kyoya has extensive knowledge and understanding of
the consumer industry filed, primarily related to foods, acquiredin the employ of Mitsubishi Corporation.

Reinstatement

Years on Board: 7

Reinstatement

Reinstatement

OutsideOutsideIndependent

Reinstatement

Independent

Sadanobu Takemasu

Keiko Hayashi

Kazunori Nishio

Miki Iwamura

President and CEO, Representative Director, Chairman of the Board

Member of the Board (outside)

Member of the Board

Member of the Board (outside)

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

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

Kazunori Nishio has thorough knowledge and expertise of theretail industry acquired through experience 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.

Years on Board: 6

Years on Board: 4Years on Board: 4

38
LAWSON INTEGRATED REPORT 2020

Years on Board: 2

Executive Officers As of March 1, 2020
Senior Executive
Managing Officer

Jun Miyazaki

Executive Managing Officer Yuichi Wada
Executive Vice President

Motonobu Miyake

Executive Vice President

Akihito Watanabe

Executive Vice President

Hitoshi Fujii

Executive Vice President

Kazuhiro Wakui

Senior Vice President

Yasuhiko Hirokane

Senior Vice President

Zhang Joshua

Senior Vice President

Toshihiko Chihiro

Senior Vice President

Satoshi Kumagai

Senior Vice President

Tatsushi Sato

Senior Vice President

Tatsuya Murase

Senior Vice President

Kisho Tsuruta

Senior Vice President

Miwako Tate

Senior Vice President

Hajime Kawamura

Senior Vice President

Yasuhiro Iseki

Newlyappointed

Senior Vice President

Hiroko Otani(Excluding directors’ additional posts)

Newly
appointed
OutsideNewly
appointed

Independent

Satoko Suzuki

Masakatsu Gonai

Shuichi Imagawa

Member of the Board (outside)Standing Corporate Auditor

Standing Corporate Auditor

Satoko Suzuki has successively served as a member of various
public and private committees related to “self-gift consumer
behavior” and others. She is known as an academic ofconsumer behavior, marketing, and brand management.

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.

In addition to his deep understanding of Lawson’s operations based on experienceacquired as the person responsible for store operations and marketing, branch manager
and CR and Human Resources Executive Officer, Shuichi Imagawa has in-depth andthorough knowledge of risk management and human resources development.

Years on Board: 0Years as auditor: 3

Years as auditor: 0

OutsideOutsideOutsideIndependent

Independent

Independent

Eiko Tsujiyama

Yuko Gomi

Keiko Yoshida

Corporate Auditor (outside)

Corporate Auditor (outside)

Corporate Auditor (outside)

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.

As a certified public accountant, Keiko Yoshida is representativeof an accounting firm and has knowledge of tax affairs,
accounting and management.

Years as auditor: 9Years as auditor: 1

Years as auditor: 039
LAWSON INTEGRATED REPORT 2020

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 boththe Group 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 shallbe no more than 11. 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 frompart-time officers (six members out of the total
seven are independent officers), to 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, forapproval.
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

collaboration with stakeholders
2. Appropriate	other than shareholders

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

appropriate information disclosure
3. Ensuring	
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://mldata.lawson.jp/en/about/governance/images/
governance_2020.pdf

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 2020

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

18

20
2

8

9

3

5

1
9*

7
3

Of which independent
officers (number)

5

4
1

2

1

Female directors (number)

8
3*2
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%

*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.
*2 The number of outside directors has been reduced because two no longer satisfy the requirements of outside directors due to the increase in the ratio of shares held by Mitsubishi Corporation.
The number of non-business executing members of the Board will remain 5.

40
LAWSON INTEGRATED REPORT 2020

Special circumstanceswith the potential toseriously 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.
As an independent listed company,
Lawson determines the terms and conditionsof transactions after comparing and examining
the prices offered by other companies,
prevailing market prices, etc. even in thetransactions with Mitsubishi Corporation,
Lawson’s parent company, and its groupcompanies, just like in transactions ingeneral, in order not to cause loss to minority
shareholders.

Corporate Governance Systemhave been selected to fill six of seven positions
as Committee members, thus creating asystem where opinions can be expressedwith a high degree of independence. Goingforward, we will continue our efforts to ensure
management transparency and independence,and to 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 express its opinion on thecandidates for the positions of director andrepresentative director on the Board of
Directors, meanwhile, independent officers

Equipped with an agile decision-making
process, Lawson has moved quickly toconstruct a highly transparent and independent
corporate governance system. Independent
officers who are considered to have no conflictof interest with the general shareholders havebeen appointed to comprise at least one thirdof the directors. Moreover, six women havebeen appointed to the positions of director
or corporate auditor with a view to promoting

Outside director(Independent)

Board of Directors
member (Inside)

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

41
LAWSON INTEGRATED REPORT 2020

Formulation and promotion of compliance andrisk management measures*Compliance and Risk Management Executive Officer (See page 45.)

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 46).
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 2019)
Total compensation, total amounts by type ofcompensation and number of eligible officers
per company officer category

Directors’ compensation

A Base compensation

Consisting of: fixed compensation (about 60%)

Status of internal control
system development

variable compensation (about 40%)

(Millions of yen)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

211

171

39

8

(of which outside directors)

(34)

(30)

(4)

(3)

Auditors

74

74

—

5

(of which outside auditors)

(50)

(50)

(—)

(4)

Total

285

245

39

13

(Note) There were 8 directors and 5 auditors as of end February 2020.

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)42
LAWSON INTEGRATED REPORT 2020

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 voluntarily established
Nomination and Compensation Advisory
Committee serves as an advisory body,moreover, that expresses its opinion to theBoard of Directors regarding nominations ofcandidates for the positions of director andrepresentative director. Since six of sevenmembers are currently independent officers, thissystem also enables the Committee to express
its opinion 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.”

Board of Directors and Audit & Supervisory
Board meetings held and attendance rates
Board of Directors

Audit & Supervisory Board

13 times

19 times

Number of meetings held
Attendance rate

Outside directors

92.3%

—

Outside auditors

100%

100%

Related sites
For details of Basic Principles Concerning Information Disclosure

https://www.lawson.jp/en/ir/disclose.html
For details concerning purchasing policies

https://www.lawson.jp/en/about/purchasing_policy/<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 amount of
which group’s transactions with the Lawson
Group in the previous business year exceeds
2% of the consolidated sales of the group ofbusiness partners concerned.
	A major business partner of the Lawson
Group or its business executors: A group ofbusiness partners to which the Lawson Group
provides products or services, the amount of
the Lawson Group’s transactions with whichbusiness group in the previous business year
exceeds 2% of the consolidated sales (grossoperating 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
executive compensation from the Lawson	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.

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 advisorsof the Lawson Group (in the case of outside
corporate auditors).
	Outside directors and outside auditors whose
tenure at the time of reappointment exceeds
eight years and 12 years, respectively, in theaggregate.
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.

Assessment of the Board of Directors’ EffectivenessIn order to further enforce the effectiveness and functionsof the Board of Directors, the Company conducted a “selfassessment on the effectiveness of the Board of Directors,”
mainly consisting of a document survey to be completedby all directors and corporate auditors. Responses to thesurvey were submitted by all 12 members, or eight directors
and four corporate auditors (as of the date of the survey),
and compiled and analyzed by an external organization. As
a result, it was observed that the current Board of Directorsof the Company is enforcing effectiveness through its rolein the resolution of important management matters andthe appropriate monitoring of business execution, which
contents were shared and discussed at the meeting of theBoard of Directors. Moreover, in the above survey, in order

43
LAWSON INTEGRATED REPORT 2020

to further reinforce effectiveness, constructive opinions
on the further expansion of the discussion on the digitaltransformation (DX) policy and management strategy andthe enhancement of information sharing for the monitoringby the Board of Directors were presented, which also werediscussed at the meeting of the Board of Directors. Moving
forward, we will endeavor to make improvements to further
enhance the effectiveness of the Board of Directors, as wellas ensure that the opinions discussed are considered. The
above self-assessment had been compiled and analyzed
only internally in the past. In the future, however, we will use
an external organization probably once in three years inorder to ensure the objectivity of the results of the analysis.

Corporate Governance
Characteristics and system of Corporate GovernanceDirectors and Corporate Auditors (As of May 28, 2020)
Name

Position

OutsideOfficers

Nomination and Number
Compensationof years
Independent
Advisory Committee in current
Officers*The double circle, ,position
indicates the chair.

Main area of experience and expertise
Other positions held concurrently

Members of the Board
Sadanobu Takemasu

President and CEO,
Representative Director

6

Chief Health Officer (CHO)

Katsuyuki Imada

Member of the Board
Senior Executive Managing
Officer

3

Division Director, Corporate Strategy and Planning
Division
Human Resources

Satoshi Nakaniwa

Member of the Board,
Executive Managing Officer

3

Chief Financial Officer (CFO)

Yutaka Kyoya

Member of the Board

7

Executive Vice President and Group CEO, Consumer
Industry Group, Mitsubishi Corporation

Keiko Hayashi

Member of the Board

4

CEO, DoCLASSE Co., Ltd.

Kazunori Nishio

Member of the Board

4

Senior Vice President and Division COO, Retail
Division, Mitsubishi Corporation

Miki Iwamura

Member of the Board

2

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

Satoko Suzuki

Member of the Board

0

Associate Professor, The School of International
Corporate Strategy at the Graduate School ofBusiness Administration, Hitotsubashi University

Masakatsu Gonai

Standing Corporate Auditor

3—

Shuichi Imagawa

Standing Corporate Auditor

0—Eiko Tsujiyama

Corporate Auditor

9

Professor Emeritus, Waseda University

Yuko Gomi

Corporate Auditor

1

Lawyer (Partner)
T. Kunihiro & Co. Attorneys-at-Law

Keiko Yoshida

Corporate Auditor

0

Representative, C.P.A.,
SHIBA Accounting Service Office

Auditors

44
LAWSON INTEGRATED REPORT 2020

Corporate
management

Corporatefinance/accounting

Legal affairs

Marketing

IT

Franchise andretail businessCorporate GovernanceCompliance and Risk Management

I will work to make Lawson a company that meets the expectations of all our
stakeholders by efficiently sensing and cross-functionally responding to diverse risks.

Jun Miyazaki
Senior Executive Managing Officer,
Corporate Communications,
Compliance & Risk Management,
Human Resources (Deputy in charge)*1	CR Executive Officer: The executive with overall responsibility forthe development and implementation of a framework for identifying
misconduct and problems concerning legal compliance andpreventing risks from arising

The Lawson Group has engaged in the convenience store and otherbusinesses that support customers’ everyday needs. In recent years,
new risks have been increasing such as the frequent extreme weather
events, leakage of personal information and spread of viral infection.
The role of CR Executive Officer*1 is to respond to the risks bypromoting internal control and compliance risk management systemin the entire group.
We have worked on food safety and hygiene management,
information security, crime prevention measures and disaster
response. We believe that it is our important mission to offer foodthat is safe and suitable to eat, protect community safety and ourcustomers’ information, and, in the event of a disaster, keep offering
goods and services in affected areas, taking advantage of our
network of stores.
The basis is to meet the needs of our customers and thecommunity. Moreover, Lawson wants to satisfy much more than
the needs. About 200 thousand people work in various business
operations of the Lawson Group. The CR Executive Officer’s role
is to keep paying attention so that all such works are conductedin harmony with the community to maintain the soundness as abusiness.
The largest risk that occurred this year is COVID-19. The
major issue has been how to ensure the safety and security of ourcustomers and store employees while continuing operations. We
have taken measures such as supplying plastic sheets to prevent
droplet transmission, masks, and disinfectants and providing social
distance posters and floor stickers to show customers where to
stand. In addition, we put up posters to indicate a less crowded timeof the day in each store to reduce customer congestion.
In the COVID-19 pandemic, digitalization accelerated. Selfcheckout registers, with which customers pay without a cashier’s
help, have become increasingly available in the stores nationwide.
Furthermore, smartphone cash registers, or customers making
payments by using an application, have become available in

45
LAWSON INTEGRATED REPORT 2020

some stores. On top of that, fully automated stores started on an
experimental basis. There is a fear of new risks in digitalization.
We will focus especially on the safety of the customers who makeelectronic payments. Working from home has become popular in the
Company as well. The establishment of worker-friendly workplaces
is another role of the CR Executive Officer. In a poor environment,
innovations will not occur, and goods and services that satisfy
customers will not be provided. We will develop a harassment-freehighly-motivated corporate culture through active communication.
We are also working hard for the SDGs. Frequent natural
disasters, such as large-scale typhoons and torrential rains are said
to be caused by global warming. Individuals and companies should
work together to address them. Lawson has agreed with the Task
Force on Climate-Related Financial Disclosures (TCFD) in April 2020.
We will grasp the risks and chances of global climate change andmake positive responses. Besides, the reduction of plastic use andfood waste is an issue that should be solved promptly. We thinkthat customer support and securing of profitability are necessary
to continue these activities. We have set up the target values,
respectively. We will gather the knowledge and expertise, bothinternally and externally and conduct various experiments in thestores for the achievement of the targets.
The relationship between the franchise stores and Headquarters
has changed in our history of 45 years. We have developed better
communication through the Lawson Owner Welfare Association,area meetings, and MO (Management Owner) General Meetings for
multiple-store management. We will continue our efforts, now and in
the future, to establish a clear and open relationship that enables thefree exchange of opinions to achieve the common goal of building
good stores that contribute to the community.
I will work to make Lawson an existence useful to thecommunity, the Group trusted by the community, and the employees
proud to work in the Group.

Corporate GovernanceCompliance and Risk Management

Internal control
 asic policy regarding the internal
B
control system ddition of the important laws that especiallyA
must be made widely known

The consumer-related laws (Food Labeling Act,
Food Sanitation Act, Health Promotion Act,etc.) have been added as the important lawsthat especially must be made widely known
for compliance purposes to establish a systemthat ensures product safety and reliability,
which is our business lifeline, and that aims tosecure consumers’ trust.

 tipulated the implementation of regularS
personnel rotation

As an employee’s assignment to a particular
job for many years may lead to an environment
where misconduct could occur, we have
newly stipulated the implementation ofregular personnel rotations to eliminate thedependence on a particular employee to do acertain job and prevent misconduct.

Lawson’s internal control system (as of June 1, 2020)
Audit &Supervisory
Board
Auditors

Internal control audits/regular meetings

Board of Directors
President and CEO

Reports on important issues

CR Executive Officer*1
Compliance & Risk Management Committee
Mutual understanding/information exchangeWith 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 2020 are
described below:

Moreover, adding Intellectual Property
Acts reinforces the internal checking system
for labels, etc. to prevent the infringement ofintellectual property rights (trademark right,
copyright, etc.) in developing sales promotion
materials.

Compliance & Risk Management Committee Meeting• Food Safety and Hygiene Management Subcommittee• BC Subcommittee• Regional Office Crime Prevention
and Disaster Defense Subcommittee• Intellectual Property/Free Gift Labeling Measures
Subcommittee• Overseas Business-related Compliance Subcommittee

Legal Department
Risk Management Department*3

Information 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 The Information Security Management Office is incorporated into the Risk Management Department.

46
LAWSON INTEGRATED REPORT 2020

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 theGroup 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 toindicate the important points from an ethicalperspective when taking action based on Group
Philosophy and Lawson’s Way. We have alsoestablished Group
Privacy Policy
and Lawson
Group Purchasing
Policy to ensurebusiness conduct
throughout theLawson Group C&R Handbook
Group.

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 and training
Lawson conducts compliance and risk
management training for all its employees eachyear for the purpose of improving their ethicalawareness and risk response capabilities. It hasdeveloped a training system to support structured,systematic learning, moreover, that begins withtraining of newly recruited employee and extends
to training of newly appointed management
personnel and specialized occupational training
as well as biannual compliance training for
management members provided by outside
instructors. Our ongoing implementation of thesetraining programs is designed to encourage
personnel in every position and with every job
description to share in the problem-solving
process leading to business enhancement. We
are currently reviewing the program contents inlight 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 and store crew members withanonymous consultations and contacts to receive
consultations from franchise owners.
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 Legal Department tosupervise compliance and the Risk Management
Department to supervise risk management
under the CR Executive Officer’s direction. These
departments cooperatively serve as crossdepartmental secretariats for the Compliance& Risk Management Committee Meeting andmanage the progress of measures implemented inthese areas by individual departments throughout
the Group to promote an effective compliancerisk management system. The Risk Management
Department, jointly with the IT Department,
serves as the secretariat for the Information
Security Committee Meeting to further enhance
information security management.
Five separate subcommittees (the Food Safety
and Hygiene Management Subcommittee, theBC Subcommittee, the Regional Office Crime
Prevention and Disaster Defense Subcommittee,
the Intellectual Property/Free Gift Labeling
Measures Subcommittee and Overseas Businessrelated Compliance Subcommittee) have been
established under the Compliance & Risk

47
LAWSON INTEGRATED REPORT 2020

Management Committee Meeting and tasked withmanaging the progress of important measureswhile preventing the emergence of risks.
The subcommittees collaborate with the
Corporate Auditors Office, moreover, receiving
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
the employees, the monitoring activities extend
to circulation 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 assistance inestablishing 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 “foodsafety and hygiene management,” “information
security” and “disaster relief,” and it has prepareda structure for responding to emergencies andresolving problems rapidly.
Meetings of the Compliance & Risk
Management Committee and the Information
Security Committee as well as of the five
subcommittees are convened under ordinary
circumstances to assess risks and to formulate
and promote measures to avoid them andprevent their occurrence. Should a serious risk
situation arise, an Emergency Risk Management
Committee is organized to resolve issues swiftlyand minimize damage. Once the problems havebeen resolved, the Company analyzes the factors
contributing to the occurrence and reviews andimproves the relevant measures to prevent any
recurrence.
We are reinforcing our emergency response
capabilities, moreover, through efforts such as
formulating the Business Continuity Plan (BCP)
and implementing disaster mitigation measures.
Our aim is to institute a business continuity (BC)framework that prevents interruption of importantbusiness activities, even when emergencies
involving serious damage occur.

Fundamental policies and objectives formaintaining business continuity (BC)“Resilience Certification”
Lawson is certified as an enterprise that
contributes to the building of national resilienceagainst disasters.
Lawson has received confirmation from the National
Resilience Promotion Office, Cabinet Secretariat tothe effect that it conforms to the “requirements of acertified organization” stipulated in the “Guidelines
relating to certification of groups
contributing to the buildingof national resilience against
disasters” established in February
2016. Lawson was recognizedby the Association for Resilience
Japan as the first convenience
store to contribute to the building of
national resilience against disasters.

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 areunavoidably interrupted, critical functions shall beresumed quickly in order to avoid undermining
our customers’ satisfaction or corporate value.
T hree main goals for maintaining BC	Fulfilling Lawson’s mission as a “community lifeline”
We will endeavor to ensure uninterrupted provision of
products and services to customers by keeping storesopen whenever possible.
	Continuation of the franchise (FC) businessWe will determine specific periods and methods forresuming operations and maintain the requisite level of FC
headquarters operations.
	Securing appropriate earnings
We have implemented measures in consideration of the
impact emergencies could exert on earnings and of social
conditions 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 in linewith the BCP, and to sustain and enhance it, as
important issues for management.

Mechanism for enhancing BC capabilities
Activities conducted to improve response
capabilities are essential for sustaining a corporate
climate adapted to responding sensitively to avariety of crises. Lawson is continually reviewing
such business components 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.

approach toward disaster relief and the standard of
conduct of the organization and its employees in theevent of a disaster. There are different versions of themanual, “Concept of Operations,” “Initial Actions,”
and “Response and Recovery Actions,” in which
the response rules and procedures for measuresaccording to the disaster level for all employees andthe entire organization are described.
Additionally, in the event of a major incident
impacting the headquarters operations, to ensure
the continuance of important business activities as
the franchise headquarters, we have formulated
the “BCP Guidelines” based on the BusinessContinuity Plan, defining the organization’s standardof conduct. The BCP Guidelines describes theoperating procedures, etc. in the occurrence of theTokyo Inland Earthquake.

Formulation of the Disaster Relief
Manual and BCP Guidelines
Lawson has formulated the “Disaster Relief Manual”
based on the disaster relief policy, defining theDisaster relief
manual

BCP manual

Disaster preparedness and response
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 disasterarea can bereopened forbusiness at an
early date.

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.

48
LAWSON INTEGRATED REPORT 2020

Implemented mobile sales indisaster-stricken areas
While many stores were affected and forced toclose temporarily by Typhoon No. 19 in October
2019, some of them implemented mobile sales
in parking lots. They provided mobile phonecharging service by making available high-speed
rechargers lent by
NTT DOCOMO,
INC. with whom
Lawson has
concludeda disaster
Lawson mobile sales vehicle (inagreement.
the parking lot of a temporarilyclosed store)

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,
21 cities and wards
Mass transit systems: 11
Electric power companies: 4
Others: Tokyo Fire Department andJapan Ground Self-Defense Force,
fuel companies<Entities concluding agreements
on assistance to stranded commuters>
Local governments: 43 prefectures,
10 ordinance designated cities(As of June 1, 2020) onclusion of agreements on provisionCof goods in times of disaster andagreements on assistance to stranded
commuters
Conclusion of agreements on provisionof goods in times of disaster

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
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 cooperatingwith the police and the Japan Franchise Association in efforts to prevent crimes against the convenience store industry as a whole.

*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 adesignated public institution by the Prime Ministerbased on Article two, Item five 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 on January 17, 2020)

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 store crew members.
Various tools and manuals, such as crime
prevention self-check lists, have also been
prepared.

A crime prevention self-check list

49
LAWSON INTEGRATED REPORT 2020

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

Financial & Non-financial Overview
Eleven-Year Financial Summary(Millions of yen)

2019

(Fiscal year)

2018

2017

2016

2015

For the year:
Gross operating revenues
		 Franchise commissions from franchise stores
		Net sales
		Other
Total operating revenues
Operating income
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 amortization2

¥
		
		
		
		
		
		
		
		
		
		

314,260
302,843
113,132
730,236
62,943
20,108
202,703(49,074)(163,910)
90,726
0

¥
		
		
		
		
		
		
		
		
		
		

302,136
288,579
109,931700,647
60,781
25,585
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
94,165
583,452
72,541
31,381
112,205(68,657)(50,201)
106,747
49,293

¥
		
		
		
		
		

1,357,732
275,347
20.0%
343,583
14,444
10,572

¥
		
		
		
		
		

1,342,329
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

¥
		
		

200
150
74.6%

¥
		
		

255
255
99.7%

¥
		
		

268
255
95.1%

¥
		
		

363
250
68.7%

¥
		
		

314
245
78.1%

		
		

7.3%
1.5%

		
		

9.3%
2.3%

		
		

9.7%
3.0%

		
		

13.5%
4.4%

		
		

12.0%
4.0%

¥
		

2,296,838
48,162¥		

2,233,739
51,569¥		

2,069,609
91,075¥
		

1,958,550
84,736¥
		

1,880,395
79,872

		
		
		
		
¥
		

1,237,391
546,542
351,442
209,624
2,345,000
2.5%

		
		
		
		
¥
		

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%

		
		
		
		
¥
		

1,033,448
463,431
276,885
186,498
1,960,266
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 income (yen/ U.S. dollars1)
Cash dividends (yen/ U.S. dollars1)
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 format3,4
		Franchise stores
		Company-operated stores
Net sales by product category3,4
		Processed foods
		Fast foods
		 Daily delivered foods
		Non-food products
Net sales of all stores
Ratio of operating income to net sales of all storesNotes: 1. The U.S. dollar amounts represent Japanese yen exchange rate against the US dollar as of February 29, 2020 ($1 = ¥109.43).
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, 2018,and 2019 represent sales by stores operated by Lawson, Inc. as well as those by Lawson Sanin, Inc.

50
LAWSON INTEGRATED REPORT 2020

*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

(Thousands of U.S. dollars1)

2012

2011

2010

2009

2019

¥
		
		
		
		
		
		
		
		
		
		

247,681
174,044
76,188497,91370,482
32,686
110,567(100,434)(3,289)141,251
41,826

¥
		
		
		
		
		
		
		
		
		
		

242,078
168,159
75,009
485,247
68,12637,96581,503(47,924)(39,650)
84,03247,888

¥
		
		
		
		
		
		
		
		
		
		

230,002
192,942
64,500487,445
66,24633,182
85,188(54,196)(31,979)
77,36143,886

¥
		
		
		
		
		
		
		
		
		
		

215,573
208,063
55,320478,957
61,76924,88586,356(52,912)(27,544)
74,572
37,845

¥
		
		
		
		
		
		
		
		
		
		

197,673
192,329
51,274441,277
55,54025,386
72,210(30,522)(28,798)
50,32633,083

¥
		
		
		
		
		
		
		
		
		
		

185,656
233,693
47,842
467,192
50,275
12,562
40,695(42,595)(27,238)
71,39927,468

$
		
		
		
		
		
		
		
		
		
		

2,871,796
2,767,463
1,033,835
6,673,094
575,190
183,754
1,852,359(448,454)(1,497,859)
829,079
0

¥
		
		
		
		
		

764,614
263,797
33.5%
76,754
12,276
7,606

¥
		
		
		
		
		

620,992
250,497
39.5%
68,75911,606
6,336

¥
		
		
		
		
		

579,809230,18139.1%
72,766
11,130
6,404

¥
		
		
		
		
		

531,453214,662
39.7%
73,67010,457
6,475

¥
		
		
		
		
		

476,036
208,466
42.7%
67,712
9,994
5,703

¥
		
		
		
		
		

448,131
198,13542.8%
54,843
9,761
5,236

$
		

12,407,317
2,516,196

		

3,139,754

¥
		
		

327
240
73.4%

¥
		
		

380
220
57.9%

¥
		
		

332
200
60.2%

¥
		
		

249
180
72.2%

¥
		
		

255
170
66.8%

¥
		
		

127
160
126.3%

$
		

1.83
1.37

		
		

13.0%
4.7%

		
		

16.1%
6.3%

		
		

15.2%
6.0%

		
		

12.0%
4.9%

		
		

12.8%
5.5%

		
		

6.5%
2.8%

¥
		

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$
		

20,989,108
440,118

		
		
		
		
¥
		

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%

		
		
		
		
$

11,307,606
4,994,448
3,211,571
1,915,600
21,429,225

51
LAWSON INTEGRATED REPORT 2020

Financial & Non-financial Highlights
Financial & Non-financial Highlights

Financial Highlights
Consolidated net sales by all stores

2.5

Approx.
(Billion yen)
2,500
2,250

2,049.5

2,157.9

2,506.9

1,750

3.5

1,500

(Billion yen)
80

72.5

thousand yen

(%)
20.0

60

62.9

60.7

(Thousand yen)
600

540

540

536

531

535

2015

2016

2017

2018

2019 (Fiscal year)

500

16.0

13.5
400

3.4

12.0

1,250

3.0

1,000

535

%

73.7
65.8

3.5

Average daily store sales in Japan*

7.3

billion yen

(%)
4.0

2,000

ROE (return on equity)

62.9

trillion yen

2,424.5

2,283.6

Consolidated operating income

12.0

40

9.7

8.0

2.9

750
500

2.5

2.5

2.5

2018

2019 (Fiscal year)

20

9.3

300

7.3

200

4.0

100

250
0

2015

2016

2017

2.0

0

2015

2016

2017

2018

0

2019 (Fiscal year)

2015

2016

2017

2018

0

2019 (Fiscal year)

Consolidated net sales by all stores (left axis)
Consolidated operating profit ratio (right axis)* The figures are those of LAWSON and NATURAL LAWSON operated by
Lawson, Inc.

Changes in the number of stores

Changes in share prices (monthly)

17,516(Yen)
12,000

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

stores(Stores)
20,00015,72815,00010,00010,05910,313

10,827

11,577

12,08912,973

13,27317,0158,000

17,516

Great
Recession

14,399Great East
Japan Earthquake

6,000

4,000

5,000

0

Increase in consumption tax(from 8% to 10%)

10,000

2,000

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

0

2019 (Fiscal year)

Domestic

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020
(Year)

Overseas

52
LAWSON INTEGRATED REPORT 2020

Non-financial Highlights
Electricity use (index) andCO2 emissions per store

Net income per share

200

Electricity use
per store

yen

(Yen)
400

Rate of food recycling*1 &number of participating stores

（%）
100

20%
reduction
targeted

Base year

79.9
80

363
313

60

300

268

100.0

255

200

200

84.0

40

80.0

0

0

2015

2016

2017

2018

74.6

250
200

95.1
245

250

255

(%)
100

99.7
255

150

150

20

2015

2016

2017

2018

0

2019 (Fiscal year)

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

30

22.5

20

906

638

kg

(Stores)
20,000106

2,775Base year

10

(kg)
900

77.5

15,000

(%)
100

77.3
75

600
10,00014,411
5,000

7,403

0

2020 (Fiscal year*)02007
2019 (Fiscal year*2)
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)

50
300

0

652

2017

(Base year)

638

2019

25
0
(Fiscal year)

Weight of plastic shopping bags used per store (left axis)
Plastic shopping bag handout rate (right axis)* E xcluding figures of LAWSON STORE 100
The rate of distribution of plastic shopping bags has become 25% (as of theend of August 2020) since July 1, 2020 (when charging for plastic shoppingbags started).

Number of working mothers & their
proportion among female employees

Percentage of male employees
taking paternity leave

Ratio of independent directors
among directors

24.4

92.0

%

%

(Persons)
250

(%)

35
30

24.4

50
0

4.6
10

23

2001

2005

67
2010

80

20

219

100

(%)
100

25

16.0
8.4

50

50.2

*1 The rate of food recycling does not include the figures of Lawson Okinawa,
Inc., Lawson Minami-Kyushu, Inc., and Lawson Kochi, Inc.
*2 Calculated from April 1 to March 31 of the following year to coincide with theadministrative fiscal year

150

100

40

0

2019

60

40

0

2010

200

74.6

68.7

60

20

80

78.1

(%)
50

* Calculated from April 1 to March 31 of the following year to coincide with theadministrative fiscal year	A reduction of 21.5% in fiscal 2019 compared with fiscal 2013 (The figures
have been changed due to the change in the coefficient.)

%

(Yen)
300

80

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

2019 (Fiscal year)

Payout ratio

%

40

20

100

120
100

76.1

68.2

50.2

(t-CO 2)

Plastic Shopping Bags Used
Per Store*

15

60

10

40

5

20

0

0

2019 (Fiscal year)

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

53
LAWSON INTEGRATED REPORT 2020

70.4

2015

80.3

80.1

2016

2017

91.0

2018

92.0

2019 (Fiscal year)

38

Corporate Information

Corporate Data As of February 29, 2020
Company name
Headquarters

Main Lawson Group Companies As of February 29, 2020
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 LAWSON STORE
100
Net sales for all stores ¥2,506.9 billion (consolidated)
Number of stores
17,516 (worldwide)
Operating areas
All 47 prefectures in Japan, China(Shanghai, Chongqing, Dalian, Beijing,
Shenyang, Wuhan, Hefei, Changsha),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 10,572 (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 STORE 100 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
Overseas business

Shares issued

100,300,000

Shareholders

31,293

Stock exchange
listings

Tokyo Stock Exchange (1st Section)

1 Mitsubishi Corporation

Distribution of shareholders by type
Financial institutions

17.3%

53.4%

Individuals, others 8.4%

3.3%

Foreign entities

17.4%

4.8

Japan Trustee Services Bank, Ltd.
(Trust account)

2,654

2.7

2,092

2.1

1,804

1.8

6 JPMorgan Securities Japan Co., Ltd.

1,262

1.3

7 Japan Securities Finance Co., Ltd.

1,179

1.2

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

1,140

1.1

Japan Trustee Services Bank, Ltd.
9
(Trust account 5)

1,009

1.0

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

942

0.9

3

4 NTT DOCOMO, INC.

Treasury shares

0.2%

50.1

4,799

8

Securities companies

50,150The Master Trust Bank of Japan, Ltd.
2
(Trust account)5

Other domestic entities

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

Consolidated subsidiary
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 subsidiaryBeijing 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

Consolidated subsidiary(Consolidated subsidiary of
Lawson Entertainment, Inc.)
Consolidated subsidiary

Dalian Lawson, Inc.

Major shareholders (Top 10)

409,300,000

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

Chongqing Lawson, Inc.

Share Information As of February 29, 2020
Authorized shares

Name of company

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

10STATE STREET BANK WEST CLIENT —TREATY 505234*The above percentages of total shares held were calculated after excluding
237,762 treasury stocks.

54
LAWSON INTEGRATED REPORT 2020

SEIJO ISHII business

Saha Lawson Co., Ltd.
SEIJO ISHII CO., LTD.

Consolidated subsidiary* Lawson, Inc. merged with Lawson Sanin, Inc. as of March 1, 2020.

Total shareholder return (TSR)
February 2016 February 2017 February 2018 February 2019 February 2020

Lawson

114.4

105.4

99.0

99.2

88.0

TOPIX total return

86.8

105.0

123.5

114.8

110.6

Store Network Development As of February 29, 2020
Total number of stores (domestic
and overseas total)*

17,516 stores

Number of domestic stores

14,598 stores

Main Businesses and Services As of February 29, 2020

Number of overseas stores

2,918 stores

Beijing 153 stores

A convenience store believes that its
fundamental role is “Creating Happinessand Harmony in Our Communities” andoperates in various store formats to suiteach community’s characteristics.

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

Operating companies

Lawson, Inc.

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

Dalian 192 stores

Operating company

Shenyang 26 stores
A store that sells a wide variety of fresh
foods and other products and has boththe user-friendliness of a convenience
store and the rich product assortment of asupermarket. The store features a seriesof products all priced 100 yen, consisting
mainly of the store’s exclusive products.

Chongqing 235 stores
Hefei 50 stores

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

Thailand 133 stores

Shanghai 1,574 stores

Lawson Store 100, Inc.

Wuhan 401 stores

The farms are located nationwide,
producing fresh fruit and vegetables for
Lawson Group stores.

Changsha 15 stores
Philippines 65 stores

Operating company

LAWSON Farm, a corporation eligible forfarmland ownership in respective locations

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.

Indonesia 72 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*	The number of domestic stores represents the total number of LAWSON, NATURAL LAWSON and
LAWSON STORE 100 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.

Operating company

Operating company

Lawson Entertainment, Inc.

United Cinemas Co., Ltd.

A bank that provides financial services such as ordinary savings
accounts, fixed deposit accounts and credit card issuance,and moreover, ATM services available at the ATMs installed in
LAWSON stores, etc. by using cash cards issued by financial
institutions throughout Japan. The bank has also started
a Smartphone ATM service that enables you to deposit orwithdraw cash, with your smartphone instead of your card, as
well as an ATM charge service that enables you to add money
to your smartphone apps with cash at the above ATMs.
Operating company

Lawson Bank, Inc.
* Lawson, Inc. merged with Lawson Sanin, Inc. as of March 1, 2020.

55
LAWSON INTEGRATED REPORT 2020

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

2020 MD&A
Management’s Discussion and Analysis

1 Eleven-Year Financial Summary
3 Industry Trends

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

4 Management Policies for Fiscal 202011 Consolidated Cash Flows

4 Overview of Domestic Convenience Store Business

12 Capital Policy

4 Overview of Merchandise and Services

12 Overview of Major Consolidated Subsidiaries and Equity Method Affiliates

4 Overview of Store Operations

18 Our Initiatives for SDGs

5 Overview of Store Development

19 Consolidated Balance Sheet

6 Other New Initiatives

21 Consolidated Statement of Income

6 Overview of Businesses in Figures

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)

2019

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

Net sales
Other

Total operating revenues
Operating income
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

314,260
302,843
113,132
730,236
62,943
20,108
202,703(49,074)(163,910)
90,7260

2018¥

302,136
288,579
109,931700,647
60,781
25,585
128,594（81,017）
277,937
140,071
66,844

2017

2016

2015

2014

2013

2012

2011

¥

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
94,165
583,452
72,541
31,381
112,205（68,657）（50,201）
106,747
49,293¥

247,681
174,044
76,188497,91370,482
32,686
110,567（100,434）（3,289）141,251
41,826¥

242,078
168,159
75,009
485,247
68,12637,96581,503（47,924）（39,650）
84,03247,888¥230,002
192,942
64,500487,445
66,24633,182
85,188（54,196）（31,979）
77,36143,886¥

215,573
208,063
55,320478,957
61,76924,88586,356（52,912）（27,544）
74,572
37,845¥900,256
281,44630.6%
30,120¥866,577
285,995
31.7%
67,692¥803,212272,997
32.9%
69,793¥764,614
263,797
33.5%
76,754¥620,992
250,497
39.5%
68,759¥579,809230,18139.1%
72,766¥

531,453214,662
39.7%
73,670At year-end:
Total assets
Net assets
Shareholders’ equity ratio
Cash and cash equivalents¥ 1,357,732
275,347
20.0%
343,583¥ 1,342,329
281,98220.6%
354,236

14,444
10,572

14,65910,395

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

¥

200
150
74.6%

¥

255
255
99.7%

13,992
10,028
¥

268
255
95.1%

Lawson, Inc. MD&A 2020

¥

363
250
68.7%

12,395
8,377
¥

314
245
78.1%

12,276
7,606
¥

327
240
73.4%

11,606
6,336
¥

380
220
57.9%

11,130
6,404
¥

332
200
60.2%

10,457
6,475
¥

249
180
72.2%

7.3%
1.5%

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%

¥ 2,296,838
48,162¥ 2,233,739
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

1,237,391
546,542
351,442
209,624¥ 2,345,000
2.5%

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%

1,033,448
463,431
276,885
186,498¥ 1,960,266
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%

Notes: 1. The U.S. dollar amounts represent Japanese yen exchange rate against the US dollar as of February 29, 2020 ($1 = ¥109.43).
2. These figures include depreciation and amortization of intangible assets.

1

13,1119,403

3. These figures include sales reported by franchise stores and are unaudited.
4. Net sales for the fiscal years 2016, 2017, 2018,and 2019 represent sales by stores operated by Lawson, Inc. as well as those by Lawson Sanin, Inc.

*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)

2010

¥

¥

2009

197,673
192,329
51,274441,277
55,54025,386
72,210（30,522）（28,798）
50,32633,083¥476,036
208,466
42.7%
67,712

¥

9,994
5,703

2019

185,656
233,693
47,842
467,192
50,275
12,562
40,695（42,595）（27,238）
71,39927,468$ 2,871,796
2,767,463
1,033,835
6,673,094
575,190
183,754
1,852,359(448,454)(1,497,859)
829,0790448,131
198,13542.8%
54,843$ 12,407,317
2,516,196

Net sales of all stores(Domestic convenience store business)

1,960.2

255
170
66.8%

127
160
126.3%

60.7

36.4

62.9

60

31.3
26.8

25.5

1,500

20.1

40
20

1,000
20

10

500

0

2015

2016

2017

2018

2019

0

(Fiscal year)

Total assets(billions of yen)
300

2015

2016

2017

2018

2019

0

2015

2016

2017

2018

2019
(Fiscal year)(Fiscal year)$

Return on equity (ROE)
Return on assets (ROA)
285.9

281.4

281.9

275.3

1.83
1.37

Dividends and payout ratio
ROE

(%)
20.0

ROA

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

(yen)
300

245

250

15.0

6.5%
2.8%

99.7
255

255

10.0

$ 20,989,108
440,118

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%

11,307,606
4,994,448
3,211,571
1,915,600$ 21,429,225

80

60

150

12.0
9.7

¥ 1,433,678
232,459

68.7

180

100

¥ 1,499,576
183,205

74.6

78.1
13.5

(%)
100

95.1

240
200

12.8%
5.5%

(billions of yen)
40

65.8

3,139,754

9,761
5,236
¥

2,160.6

73.7

2,285.3 2,345.0

30

272.9

¥

2,043.2

Net income attributable to ownersof parent(billions of yen)
80

72.5

(billions of yen)
2,500

2,000

Operating income

9.3

120

40

60

20

7.3
5.0

4.0

4.4

1.5
3.0

0

2015

2016

2017

2018

2019

(Fiscal year)

0.0

2015

2016

2017

2.3
2018

2019

(Fiscal year)

0

2015

2016

2017

2018

2019

0

(Fiscal year)

Lawson, Inc. MD&A 2020 2

Financial Section

Management’s Discussion and Analysis
Industry Trends
Annual sales of convenience store industry in 2019 (January to December) amounted■ Number of convenience storesto 12,184.1 billion yen, up 1.7% from the previous year due primarily to favorable
sales of products such as ready-made food by expanding the range of products that
respond to changes in dietary life based on decreasing birthrate and aging populationand the prevalence of the nuclear family and women's social progress, as well as
increased average spending per customer thanks to the effect of cashless shopping(Calendar year)
Number of convenience
stores

The total number of stores as of the end of December 2019 stood at 56,502,
which was about the same level with the previous year.** For annual sales and the total number of stores, Current Survey of Commerce, Ministry of Economy, Trade and Industry isreferred to, and for increase/decrease ratio in existing store sales, Convenience store statistics investigation annual report" by
the Japan Franchise Association is referred to.

■ Retail industry market size and convenience store share 1(Calendar year)

2019

2018

2017

2016

2015

(Billions of yen)

2014

2013

2012

2011

2010

2009

Total retail industry annual
145,047 144,965 142,514 139,877 140,666 141,219 138,897 137,585 135,157 136,479 132,961
sales
Convenience store sector
annual sales
Convenience store share

12,1848.4%

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%

8,774
6.5%

8,113
5.9%

7,980
6.0%

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

■ The net sales of all stores among the top 3 chains in the convenience store industry 1(Billions of yen)

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

Lawson

2,506

2,424

2,283

2,157

2,049

1,961

1,945

1,907

1,826

1,683

1,666

Seven-Eleven Japan

5,010

4,899

4,678

4,515

4,291

4,008

3,781

3,508

3,281

2,948

2,785

FamilyMart 2

2,965

2,983

3,016

3,009

2,006

1,860

1,722

1,585

1,535

1,440

1,274

Total of the top 3 chains

10,482

10,306

9,977

9,682

8,346

7,829

7,448

7,000

6,642

6,071

5,725

Total market share of the
top 3 chains

86.0%

86.0%

84.9%

84.6%

75.9％

75.1％

75.4％

73.9％

75.7％

74.8％

71.7％

(Fiscal year)

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 2016, Circle K Sunkus and FamilyMart merged and in November 2018, brand integration of approximately 5,000
stores was completed.

3

Lawson, Inc. MD&A 2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

56,502

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

43,37342,347

41,724

Source: “Current Survey of Commerce,” Ministry of Economy, Trade and Industry■ Non-consolidated operating results

rebate campaign started in October. Net sales of existing stores increased by 0.4%
compared to the previous year.

(Stores)(Fiscal year)
Net sales of all stores

2019
2,296,156

As a percentage
of all stores(Millions of yen)

2018

2017

2016

2015

100.0% 2,236,125 100.0% 2,110,454 100.0% 2,027,504 100.0% 1,960,267 100.0%

Gross operating
revenues

390,81117.0%

385,67817.2%

372,89117.6%

356,18617.5%

333,856

17.0%

Gross operating profit

356,385

15.5%

348,491

15.6%

335,792

15.9%

325,71616.0%

308,88915.7%

311,660

13.6%

302,779

13.5%

284,771

13.5%

268,29613.2%

251,64212.8%

13,363

0.6%

12,5460.6%

13,8080.6%

14,705

0.7%

Selling, general andadministrative expenses
Advertising andpromotional expenses

14,112

0.6%

Personnel expenses

46,2612.0%

45,9032.0%

44,722

2.1%

41,5272.0%

39,2482.0%

Facility expenses

181,194

7.9%

172,5747.7%

160,243

7.6%

150,182

7.4%

142,073

7.2%

Other SG&A
expenses

70,091

3.1%

70,9393.1%

67,2603.2%

62,7793.1%

55,616

2.8%

Operating income

44,725

1.9%

45,711

2.0%

51,021

2.4%

57,4192.8%

57,247

2.9%

Ordinary income

45,9622.0%

51,4432.3%

50,5082.4%

56,4592.7%

54,9832.8%

Net income

15,4860.7%

31,002

1.4%

19,4170.9%

19,0880.9%

21,802

1.1%

Management Policies for Fiscal 2020

Overview of Merchandise and Services

For the year ended February 29, 2020, while changes in community needs resulting
from factors such as an aging population, the prevalence of the nuclear family,
women's social progress and rising health consciousness are serving as a tailwind
for the convenience store industry, competition across boundaries of businesscategories has been fiercer.
Given such a business environment, the surrounding realities of franchise storesare becoming more and more severe, and since 2015, we have been trying toraise our store productivity by making maximum use of digital technology such as
semi-automatic ordering system, introduction of POS (point-of-sale) cash registers
equipped with an automatic change dispenser function.
We focus on building a strong partnership with franchise stores as one ofour most important issues. In April 2019, in order to strengthen relationship withfranchise stores and promote franchise store support measures, we formulated
Action Plan and in November, we informed the progress of the plan. In addition, in
February 2020, as a new policy to stabilize franchise store business, we announced
short-term to medium- to long-term initiatives such as support for low-profit franchise
store owners in operating multiple stores, support for store manager training andmeasures for new franchise owners.

On the merchandise side, in order to realize overwhelmingly delicious foods,
we focused on development of new products and further quality improvementof existing products. In the rice dishes, our Kinshari onigiri rice ball series, firstlaunched in April 2019, which features rice with a smooth and fluffy texture, gained
popularity, while Akuma-no (= too delicious to stop eating) onigiri rice balls series,
which has become Lawson's representative staple item, had consistently strong
sales. In sandwich category, due to renewal of sandwiches and introducing a neweating scene by new series SAND FULL(plenty of delicious ingredients), favorable
sales continued. In the over-the-counter fast food category, in addition to renewed
L-Chicki series, staple items and seasonal new products of MACHI café gained
popularity. In the dessert category, our hit BASCHEE-Basque-style cheesecake-,first launched in March 2019, gained popularity, also there were hit items of Uchi
Café sweets one after another, and Lawson's sweets attracted a lot of attention.
In the bakery category, Machi-no-pan, a new series of bakeries, pursuing
texture and deliciousness of ingredients with selected materials and manufacturingmethod, firsts launched in March 2019, and successful renewal of existing staple
items both contributed to rise in sales.
On our sales promotion side, effective measures to attract customers werelaunched, including a stamp campaign, smartphone stamp rally and an exciting
speed lottery capitalizing on our strength in the entertainment field.

Overview of Domestic Convenience Store Business
Aiming to become Lawson to be recommended by every customer, for domestic
convenience store business, we implement initiatives to fulfill three commitments;
Overwhelmingly Delicious, Human Kindness and Environmental. (Machi)
friendliness. We are addressing to improve our product offering even further bydeveloping overwhelmingly delicious and health-conscious products only at LAWSON,
and we are also focusing on adherence to serving customers courteously at our storesas well as eco-friendliness such as reduction of food waste and plastic usage.
From October 1, 2019, the consumption tax rate has been raised from 8% to10%, and reduced tax rate system has been introduced at the same time. In LAWSON
stores, food and beverages are subject to the reduced tax rate, excluding foodand drinks consumed at eating area inside stores as well as alcoholic beverages.
In addition, as one of the subsidy projects implemented by the government with
the increase in the consumption tax rate, 2% of the payment amount is returned tocustomers who purchased by cashless payment at applicable LAWSON stores.

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 product offering that meets community needs; and (3) keeping
our stores and communities clean. We actively promoted improvement of store
operations and strengthening franchise support system during the fiscal year underreview. We will continue to expand deployment of self-checkout registers which
utilizes self-mode of the POS cash registers with automatic change dispensers.
In January 2020, we temporarily closed 102 franchise stores nationwide during
the New Year holidays as part of an experimental trial. Our plan for the next fiscal
year will be examined by carefully looking at the future conditions under rapidlychanging environment due to the influence of COVID-19.
Lawson, Inc. MD&A 20204

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 in Japan during the fiscal year under review stood at 554 while 769 stores
were closed due to facilitating closings of low profitability stores and the total numberof stores in the country was 14,444 as of the end of February 2020.*
In an effort to establish convenience store models catered to an aging population
and rising self-medication 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-the counter pharmaceuticals,
including such healthcare-focused stores, reached 222 as of the end of February2020 (of which 49 stores were Pharmacy LAWSON stores equipped with drugdispensing pharmacies). The number of LAWSON stores with a nursing careconsultation counter reached 24 as of the end of February 2020. Furthermore, wehave 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 number ofsuch stores has reached 323 as of the end of February 2020. Building on our expertisedeveloped through operation of in-hospital LAWSON stores, we will continue tosupport the lives of all people interacting with hospitals.
At NATURAL LAWSON stores, as a store that supports a beautiful, healthy
and comfortable lifestyle, we offer assortment of products that can only be obtainedat Natural Lawson such as original products with carefully selected ingredientsand collaborative products with famous brands. As for LAWSON STORE100, we
continue to meet customer needs by offering a wide range of product assortment from
fresh vegetables and fruits, daily foods, prepared food, beverages to daily necessities
focusing on valuable 100 yen products. As of the end of February 2020, the numberof NATURAL LAWSON stores reached 145, while the number of LAWSONSTORE100 stores reached 742.

■ Number of stores in the convenience store business in Japan
2019

2018

2017

2016

2015

14,444

14,65913,992

13,111

12,395Openings

554

1,067

1,250

1,143

1,007

Closings

769

400

369

427

888

− 215

667

881

716

119

(Fiscal year)
Total number of stores

Net increase

Note:	Including the number of stores operated by Lawson Mart, Inc., Lawson Sanin, Inc., Lawson Kochi, Inc., Lawson Kumamoto, Inc.,
Lawson Minami-Kyushu, Inc., and Lawson Okinawa, Inc■ Number of convenience stores in JapanStoresStoresStores2017
ShareStoresShare

Company-operated stores
LAWSON

263

1.8%

− 40

303

2.1%

284

2.0%

NATURAL LAWSON

22

0.2%

−2

24

0.2%

28

0.2%

Type B

1,794

12.4%

−45

1,839

12.5%

1,616

11.5%

Type G

1,342

9.3%

−124

1,466

10.0%

1,582

11.3%

Type C

62.3%

Franchise stores

9,300

64.4%

56

9,244

63.1%

8,715

NATURAL LAWSON

123

0.9%

8

115

0.8%

115

0.8%

LAWSON STORE100

742

5.1%

−64

806

5.5%

805

5.8%

13,586

94.1%

−211

13,79794.1%

13,14593.9%

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

5

0.0%

ー

5

0.0%

5

0.0%

280

1.9%

−7

287

2.0%

285

2.0%

285

2.0%

−7

292

2.0%

290

2.1%

Lawson Kochi, Inc.
Company-operated storesFranchise stores
Subtotal

5

0.0%

−1

6

0.0%

3

0.0%

134

0.9%

ー

134

0.9%

136

1.0%

139

1.0%

−1

140

1.0%

139

1.0%

Lawson Minami-Kyushu, Inc.
Company-operated stores

Subtotal

3

0.0%

ー

3

0.0%

2

0.0%

192

1.3%

−2

194

1.3%

192

1.4%

195

1.4%

−2

197

1.3%

194

1.4%
0.0%

Lawson Okinawa, Inc.

Franchise stores
Subtotal

Lawson, Inc. MD&A 2020

Share

2018

Lawson, Inc.

Company-operated stores

5

Net increasein the term

2019

(Fiscal year)

Franchise stores* The numbers of openings and closings and the total number of stores in Japan include the number of stores operated by Lawson, Inc., storesrun by our subsidiary Lawson Sanin, Inc., (merged with the Company on March 1, 2020) and stores operated by Lawson Kochi, Inc., Lawson
Minami-Kyushu, Inc., and Lawson Okinawa, Inc. which are equity-method affiliates.

(Stores)

Total number of convenience storesin Japan

5

0.0%

1

4

0.0%

3

234

1.6%

5

229

1.6%

221

239

1.7%

6

233

1.6%

224

14,444100.0%−215

14,659100.0%

13,992100.0%

Financial Section

Other New Initiatives
On December 16, 2019, KDDI CORPORATION and Lawson, Inc. executed a capitalbusiness partnership to promote data marketing utilizing the customer bases of bothcompanies and create new consumption experiences through the application ofadvanced technologies. Under this partnership, KDDI and Lawson will combine KDDIʼsadvanced technologies including fifth-generation mobile communication system called
5G with the real-world infrastructure of Lawson's over 14,000 stores to develop
next-generation convenience store services that involve data and financial services andcreate new consumption experiences for customers.
In February 2020, at Fujitsu Shinkawasaki TS cash register-free store, we started
cash register-free store” demonstration experiment which uses digital technology toallow customers to shop without going through the cash registers.

Overview of Businesses in Figures
Net Sales
Net sales of all LAWSON stores (consolidated) for the year ended February 29, 2020
amounted to 2,506,900 million yen (up 3.4% from the previous fiscal year). This sales
growth was achieved by the increase in LAWSON stores overseas although stores inJapan decreased, the increase in franchise commissions from franchise stores, andfavorable sales of Seijyo Ishii business and Entertainment-related business, among
other factors.
Sales of existing stores for fiscal 2019 (non-consolidated basis) increased by
0.1% from the previous fiscal year. Under our effort of reinforced promotions onpurchases in evenings and at night to expand the range of our products, Lawsonʼsoriginal products such as desserts, bakeries, and sandwiches sold well. While harshcompetition across boundaries of business categories continues, although the numberof customers decreased by 1.6% from the previous fiscal year, average spending per
customer increased from the previous fiscal year by 1.7% as a result of price increaseof cigarettes, good sales of multiple purchases under effort of reinforced promotions
on purchases in evenings and at night and favorable sales of high unit price items suchas desserts, among other factors.
Regarding consolidated results by product category, in the fast food category,among rice balls, Kinshari series, first launched in April 2019, and Akuma-no onigiri

series, which has become Lawson's staple item, pushes up sales. Also for sandwich
category, renewal of sandwiches was successful and we could introduce a new eating
scene to have sandwiches at dinner by our new series SAND FULL. In the over-thecounter fast food category, prepared food Toke-Koro and Afure-Menchi among
other items, sole well.
In the daily delivered food category, a huge hit dessert BASCHEE, there
were a series of hit items in Uchi Café SWEETS and sales continued to be strong
throughout the year and greatly exceeded the sales of the previous year. In the bakery
category, renewal of staple products and a new Machi-no-pan series contributed tosales. Also, sales of frozen foods which we continue strengthening by expanding theassortment of items and Lawson Select ready-made meals remained strong.
In the processed food category, Lawson's original cup noodles and baggedsnacks sold well and sales increased. Also, after tax increase in October 2018,
although price increase of cigarette pushed up sales in the first half compared to theprevious year, such impact calmed down in the second half and sales remained about
the same level as the previous fiscal year.
■ YoY changes in net sales of existing stores, average number of customers and average spending

per customer *
（%）
110

105
100
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
2019
2014
2015
2016
2017
2018
Net sales of existing stores

Average number of customers

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

per customer *(Fiscal year)
Net sales of existing stores (YoY)

2019

2018

2017

2016

2015

100.1%

99.5%

99.9%

99.8%

101.4%

Average number of customers

98.4%

97.7%

98.7%

99.0%

100.9%

Average spending per customer

101.7%

101.8%

101.3%

100.8%

100.4%* The total of LAWSON and NATURAL LAWSON operated by Lawson, Inc.

Lawson, Inc. MD&A 20206

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

2019

2018

523.3 24.1%

2017

520.4 24.7%(Billions of yen)

2016

484.9 24.5%

2015

464.8 24.5%

450.5 24.7%

307.3 14.2%

283.9 13.5%

268.0 13.5%

251.4 13.3%

235.6 12.9%

Processed foods (share)

1,143.6 52.7%

1,107.3 52.6%

1,043.0 52.7%

995.3 52.6%

960.8 52.8%(Cigarettes) (share)

559.1 25.8%

532.9 25.3%

498.6 25.2%

471.9 24.9%

460.0 25.3%

195.7

194.2

182.9

182.1

174.0

Daily delivered foods (share)

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

9.0%

2,170.0 100.0%

9.2%

2,105.9 100.0%

9.3%

1,979.0 100.0%

9.6%

1,893.7 100.0%

9.6%

Gross profit margin by product category *1
The gross profit margin stood at 31.3%, up 0.1% from the previous fiscal year as aresult of our effort to improve profit margins of fast foods and daily delivered foods,
among other items.
■ Gross profit margin by product category (Non-consolidated) *1
2019

2018

2017

2016

2015

Fast foods

38.9%

38.2%

38.3%

38.4%

38.4%

Daily delivered foods

34.3%

34.0%

33.9%

34.0%

34.0%

Processed foods

23.8%

23.9%

24.0%

24.1%

24.0%

Non-food products *2

50.5%

50.3%

50.1%

49.1%

49.7%

Gross profit margin

31.3%

31.2%

31.3%

31.4%

31.3%

(Fiscal year)

1,821.1 100.0%* The total of LAWSON and NATURAL LAWSON operated by Lawson, Inc.

■ Product categories
Category

Products included

Fast foods

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

Daily delivered foods

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

Processed foods

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

Non-food products

Daily necessities, books, magazines, etc.

■ Third party bill settlement services (Non-consolidated) *3(Fiscal year)
Bill settlements (millions of yen)

2019

2018

2017

2016

2015

2,498,711

2,412,349

2,263,937

2,132,450

2,088,693

Number of transactions (millions)

214.6

215.2

208.6

202.0

198.3

Commission revenues (millions of yen)

11,435

11,466

11,154

10,788

10,671*1. The total of LAWSON and NATURAL LAWSON operated by Lawson, Inc.
*2. Gross profit margin of non-food products is calculated including commission income.
*3. The total of LAWSON,NATURAL LAWSON and LAWSON STORE 100 operated by Lawson, Inc.

7

Lawson, Inc. MD&A 2020

Financial Section■ Main Type of Lawson contracts
Contract type

■ Main Type of LAWSON STORE100 contracts
Cn

Contract termBn
10 years from store opening day

Requirements for FC owners

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

Land and buildings

Provided by headquarters

Prepared by a franchise store

Investment in store
construction and interior
decoration expenses

Borne by headquarters

Borne by a franchise store

Business fixtures

Necessary
expenses

Land and buildings

Contract stores
Contract term

Provided by headquarters

Payment by aFranchise fee ¥1.0 million (excluding tax)
franchise store atBreakdown: Training expenses ¥500,000, store opening preparation commission ¥500,000
time of contract*1

Other expenses

Headquarters Charge

Contract type*2

Partial guarantee for
expenses associated withproduct disposal losses

Partial burden of utility
expenses *3
Minimum guarantee(annual franchisee income *4)

Necessary
expenses

The following percentage of gross profit:

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%• ¥3.0 million or less: 41%• Greater than ¥3.0 million up to¥4.5 million: 36%• Greater than ¥4.5 million up to ¥6.0 million:
31%• Greater than ¥6.0 million: 21%

Headquarters will bear the following percentage of clearance and disposal costs according
to their proportion in merchandise sales:

Investment

Store construction
and interior
decoration
expenses
Business fixtures

Minimum guarantee(annual franchisee income *6)¥18.6 million* Non-24-hour stores ¥15.6 million¥19.8 million*Non-24-hour stores ¥16.8 million*1 The amount is paid by the franchise store to headquarters at the time of the franchising contract.
*2 Add 3% for non-24-hour stores to each of the above percentage.
*3 The ceiling on the monthly amount borne by headquarters is ¥250,000.
*4 Franchisee income = Gross profit - Headquarters Charge

Provided by headquarters
New opening stores or stores already being operated
by the company

Land and building owned
by a franchise store

Franchise fee ¥1.0 million (excluding tax)
Breakdown: Contract fee ¥250,000 (excluding tax)/Training expenses ¥250,000(excluding tax)/Store opening preparation commission ¥500,000 (excluding tax)
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¥20.4 million¥22.2 million

Headquarters Charge *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 afranchise store partially borne byheadquarters)

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

• Greater than 2.0% up to 3.0%: 20%• Greater than 3.0% up to 4.0%: 30%• Greater than 4.0%: 55%
50% of electricity expenses and store air conditioning
energy expenses are borne by headquarters

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

10 years from store opening day
Payment by afranchise store attime of contract *5
Other expenses

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

VL-J

̶

*5 The amount is paid by the franchise store to headquarters at the time of the franchising contract.
*6 Franchisee income = Gross profit - Headquarters Charge*7 The minimum guarantee and headquarters income apply to stores operating on a 24-hour basis.

Lawson, Inc. MD&A 2020

8

Items of the Consolidated Statement of Income
Operating Revenues
For the year ended February 29, 2020, gross operating revenues consisting of net
sales, franchise commissions from franchise stores, and Other stood at 730.2 billion
yen, an increase of 29.5 billion yen from previous fiscal year. This was attributable tothe favorable sales of Seijyo Ishii business and Entertainment-related business, among
other factors, and increased franchise commissions from franchise stores in domestic
convenience store business.
Selling, General, and Administrative Expenses (consolidated and non-consolidated)
Consolidated selling, general, and administrative expenses stood at 461.5 billion yen, an
increase of 19.7 billion yen compared to the year-ago period.
This increase was attributable to the increase of selling, general, and administrative
expenses due to the increased number of stores, the increase in labor costs in Seijyo Ishii
business and Entertainment-related business and the increase in software depreciation
and amortization associated with system development such as the POS cash registers
and new store computers introduced in the previous fiscal year.

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

Net income attributable to owners of the parent
Extraordinary loss increased mainly due to loss on disposal of property and store
equipment and impairment of long-lived assets caused by closing low profitability
stores, net income attributable to owners of the parent for the year under review stoodat 20.1 billion yen, a decrease of 5.4 billion yen compared to the year-ago period while
up 2.1 billion yen compared to the plan.

9

Lawson, Inc. MD&A 2020

2019

2018

2017

2016

2015

86,53584,27979,13573,893

68,994

18.7%

19.1%

19.3%

19.2%

19.4%

29,89028,25426,00130,59429,461

6.5%

6.4%

6.3%

7.9%

8.3%

133,880

132,739

124,387

115,926

108,795

29.0%

30.0%

30.3%

30.2%

30.6%

2,705

2,826

2,796

2,149

2,763

Percentage composition

0.6%

0.6%

0.7%

0.5%

0.8%

Depreciation and amortization

79,06966,73558,49955,51649,157

Percentage composition

17.1%

15.1%

14.3%

14.5%

13.8%

62,03553,27647,59544,65240,270Percentage composition
Rent
Percentage composition
Equipment lease	Depreciation of property and store
equipment
Percentage composition

13.4%

12.0%

11.6%

11.6%

11.3%

Amortization of intangible assets

17,033

13,45910,903

10,864

8,886

3.7%

3.0%

2.7%

2.8%

2.5%

129,466

126,992

119,311105,182

95,791				Percentage composition

Other
Percentage composition

Operating Income
Operating income for fiscal 2019 stood at 62.9 billion yen, up 2.1 billion yen comparedto the year ago period and exceeded the plan of 60.8 billion yen.
On the non-consolidated basis, in addition to effect created by closing low
profitability stores, we tried to reduce food waste at franchise stores and reduce
cost at headquarters, however, there was IT cost increase due to renewal of store
computers, the result was 900 million yen profit decrease compared to the year ago
period. However, consolidated operation income increased due to the contribution of
profits from the Seijo Ishii business and entertainment businesses, which had strong
sales, and the cost reduction of Financial service business, among other factors.

(Millions of Yen)

Total
Percentage composition

28.1%

28.7%

29.1%

27.4%

27.0%

461,547

441,825

410,129

383,260

354,961

100.0%

100.0%

100.0%

100.0%

100.0%

Financial Section

Items of the Consolidated Balance Sheet●Consolidated Balance Sheet

Current Assets
Current assets increased by 17.0 billion yen from the end of the previous fiscal year
to 636.6 billion yen, mainly reflecting an increase of 38.0 billion yen in accounts
receivable-other and a decrease of 10.6 billion yen in cash and deposits. The increasein accounts receivable-other was attributable to increased accounts receivable topayment service providers in accordance with increased cashless payment.
Property and store equipment
Property and store equipment increased by 10.6 billion yen reflecting an increase ofstore assets.
Investments and other assets
Investment and other assets decreased by 12.3 billion yen due to a decrease ingoodwill and software.
Current Liabilities
Current liabilities decreased by 36.5 billion yen from the end of the previous fiscal
year to 561.9 billion yen, mainly reflecting a decrease of 86.7 billion yen in short-termloans payable, a decrease of 43.1 billion yen in current portion of long-term debt andan increase of 61.2 billion yen in deposits received. The decrease of short-term loans
payable was attributable to repayment with increased deposits received throughfinancial institution transactions in Financial service business. The decrease of current
portion of long-term debt was attributable to refinancing to long-term debt.
Long-term Liabilities
Non-current liabilities increased by 58.5 billion yen from the end of the previous fiscal
year to 520.4 billion yen, mainly reflecting an increase of 50.0 billion yen in long-termloans payable. As a result, total liabilities increased by 22.0 billion yen from the end of
the previous fiscal year to 1,082.3 billion yen.
EquityEquity decreased by 6.6 billion yen from the end of the previous fiscal year to 275.3
billion yen, mainly reflecting a decrease of 2.3 billion yen in capital surplus and adecrease of 1.8 billion yen in valuation difference on available-for-sale securities.
As a result, shareholders equity ratio was 20.0% (20.6% as of the end of theprevious fiscal year).

●Accounts Specific to the Companyʼs Consolidated Balance Sheet
Shown below are accounts that are specific to the Companyʼs balance sheet.

Accounts Receivable-Due from Franchised Stores/Accounts Payable-Due toFranchised 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 for them.
The Company records the amount in accounts receivable-due from franchised stores.
As of February 29, 2020, accounts receivable-due from franchised stores stood at 47.3
billion yen, an increase of 100 million yen compared to the end of the previous fiscal year.
On the other hand, all franchise storesʼ daily sales proceeds are sent to theCompany, and exceed, on occasion, accounts receivable-due from franchised stores.
In such event, the Company records the amount in accounts payable-due to franchised
stores” on the consolidated balance sheet, as part of outstanding liabilities. As of
February 29, 2020, accounts payable-due to franchised stores stood at 1.8 billion yen,
an increase of 200 million yen compared to the end of the previous fiscal year.
Long-term Loans Receivable
Long-term loans receivable consists mainly of store construction cooperation money
for landlords (store land and building owners). Long-term loans receivable as ofFebruary 29, 2020 stood at 42.4 billion yen, a decrease of 1.5 billion yen compared tothe end of the previous fiscal year.
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 29, 2020 totaled 107.1 billion yen, an increase of 100 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 stood
at 2,498.7 billion yen, an increase of 3.6% compared to the end of the previous fiscal
year. As of February 29, 2020, deposits received amounted to 193.0 billion yen, an
increase of 61.2 billion yen compared to the end of the previous fiscal year.

Lawson, Inc. MD&A 202010

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

Consolidated Cash Flows

Total consolidated capital expenditures for the year ended February 29, 2020 stood at
90.7 billion yen, a decrease of 49.3 billion yen compared to a year-ago period.
Investments in new stores amounted to 24.0 billion yen, a decrease of 18.0 billion
yen compared to a year-ago period reflecting smaller number of new stores focusing
on quality and reverse effect of payment for conversion in the previous fiscal year.
Investments in existing stores totaled 10.1 billion yen, a decrease of 1.2 billion
yen compared to a year-ago period. Main driver of this decrease was investment on
existing stores to support franchise stores such as refurbishment of stores while there
was reverse effect of payment for conversion in the previous fiscal year.
Investment on systems totaled 10.9 billion yen, a decrease of 7.2 billion yen
compared to a year-ago period. This is mainly because of reverse effect of system
investment in Financial service business in the previous fiscal year.
Lease transactions stood at 42.5 billion yen, a decrease of 16.4 billion yen
compared to a year-ago period mainly due to significant reverse effect of investment
for the introduction of POS cash registers in the previous year, although there is someinvestment on new store computers.
Shown below is the breakdown of the main capital expenditures.

Net cash provided by operating activities for the year ended February 29, 2020 stoodat a cash inflow of 202.7 billion yen, a cash increase of 74.1 billion yen compared toa year-ago period, due mainly to an increase of deposits received and an increase offunding in financial institution transaction in Financial service business.
Net cash used in investing activities for the year ended February 29, 2020
amounted to a cash outflow of 49.0 billion yen, a cash decrease of 31.9 billion yen
compared to a year-ago period, which was due, among others, to decrease inpayments caused by acquisition of property and store equipment as well as acquisitionof intangible assets.
Net cash used in financing activities for the year ended February 29, 2020
amounted to a cash outflow of 163.9 billion yen, a cash decrease of 441.8 billion yen
compared to a year-ago period, which was due, among other reasons, to a decreasein funding caused by long-term loans payable.
As a result, cash and cash equivalents as of February 29, 2020, stood at
343.5billion yen, a decrease of 10.6 billion yen compared to February 28, 2019.

■ Capital Expenditures(Millions of Yen)

2019

2018

2017

2016

2015

New store investments

24,04142,08255,86347,594

40,460Existing store investments

10,146

11,425

7,403

7,233

6,727

IT-related investments

10,96818,195

18,615

19,261

15,882(Fiscal Year)

747

7,295

5,401

1,464

1,466

45,90378,99887,28375,55464,535

Other investments
Sub-total investments
Investments and advances

2,262

2,019

4,358

1,594

4,122

Leases*42,55959,05348,854

42,63438,089Total

90,726140,071

140,495

119,784

106,747* 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 40,682 million yen in fiscal year 2018 and 53,318 million yen in
fiscal year 2019.

■ Breakdown of depreciation and amortization(Millions of Yen)

2019

2018

2017

2016

2015

Depreciation of property andstore equipment

62,14953,38447,69744,79240,396

Amortization of intangible assets

17,033

13,45910,903

11,406

8,897

Total depreciation andamortization

79,183

66,84458,601

56,19949,293(Fiscal Year)11

Lawson, Inc. MD&A 2020

Financial Section

Capital Policy

Overview of Major Consolidated Subsidiaries and Equity Method Affiliates

As a policy to provide appropriate distribution of profit in accordance with our
performance while maintaining financial health, from the fiscal year under review, we
introduced consolidated dividend payout ratio to clearly demonstrate our intention
for profit sharing with shareholders. Although our shareholders-oriented management
will not change, we will establish a basic policy; while continuing our efforts to support
franchise stores and investment to improve profit of franchise stores, we will provide
our shareholders with as much dividends as possible within the range of dividend
payout ratio and we decided to pay dividends at a consolidated dividend payout ratio
target of 50%, with a minimum of 150 yen per share as the lower limit.
We plan to pay 150 yen per-share dividend for fiscal year ending February 29,
2020. As for fiscal year ending February 28, 2021, we plan to pay 150 yen per-share
dividend.

Consolidated financial results for the year ended February 29, 2020 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-related business, financial services business,and overseas business. The following paragraphs outline the business activities andfinancial results of Lawson, Inc. s major consolidated subsidiaries and affiliates.

(Yen)

(%)

150

500

126.3

120

300
200
100
0

51.2

66.8

66.6
160

160

170

72.2
180

240
200

220

60.2

57.9

73.4

245
78.1

250

95.1

99.7

255

255

90
74.6

68.7

150

110

2007

60
30

2008

2009

2010

Annual dividends per share (left axis)

2011

2012

Established on November 14, 2013, Lawson Store100, Inc. succeeded to theoperational functions of Ninety-nine Plus, Inc., including its store operation and productdevelopment, on February 1, 2014 through an absorption-type company split. The
former succeeded to the latterʼs store-related assets including franchise agreements■ Annual dividends per share & payout ratio

400

Lawson Store100, Inc. (consolidated subsidiary)

2013

Payout ratio (right axis)

2014

2015

2016

2017

2018

2019

0

(Fiscal Year)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 is convenience store-sized mini supermarket with basic
merchandise assortment centering on fresh foods. Supporting customers ʼ daily
dietary life with well-selected and safe quality vegetables and fruits, it serves a wide
range of customers from children to senior citizens, with a focus on single person andhomemaker customers.
For the year ended February 29, 2020, Lawson Store100, Inc. had a total of 742
stores (a decrease of 64 stores compared to February 28, 2019) at the period-end
date. Operating loss stood at 700 million yen, an increase of 400 million yen comparedto the year-ago period. This was mainly attributable to the fact that the fruit andvegetable prices remained at a low level and fierce competitive environment continued.
■Lawson Store100, Inc.

(Millions of Yen)

(Fiscal Year)

2020.2

2019.22018.22017.2

2016.2

2015.2Gross operating revenues

40,49342,29544,942

48,111

50,67578,232

Operating income (loss)

（759）

（348）

（325）

545

375

1,763

Net income (loss)

（600）

（191）

（381）

441

286

985

*Consolidated starting from February 2013

Lawson, Inc. MD&A 2020

12

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 insupply chain business activities as an influential player and to help streamline the
manufacturing and logistics operations. The Company aims to build a manufacturingretailer business model that coherently covers the entire supply chain from the
upstream to the downstream through structural reform of supply chain from raw
materials procurement to manufacturing to logistics to the store.
For the year ended February 29, 2020, operating income amounted to 2.8 billion
yen which was an increase of 300 million yen compared to the year-ago period due
mainly to improved gross profit margin.

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.,a convenience store operator based in Hiroshima City. In November 2016, Lawson
Sanin, Inc. started a regional franchise business. In June 2019, the Company madeLawson Sanin into a wholly-owned subsidiary and as of the end of February 2020, it
operates 285 stores (a decrease of 7 stores compared to the year-ago period).
For the year ended February 29, 2020, operating income stood at 300 million yen.

(Fiscal Year)

2020.2

2019.22018.22017.2■ SCI, Inc.

Gross operating revenues

7,517

7,527

7,876

2,460

Operating income (loss)

379

403

582

（56）

Net income (loss)

98

148

254

（75）

(Millions of Yen)

(Fiscal Year)

2020.2

2019.22018.22017.2

2016.2

2015.2Gross operating revenue

304,877

309,482

283,884

256,143

191,299

87,638Operating income

2,817

2,489

2,385

1,860

2,365

1,128

Net income

1,848

1,624

1,558

1,395

1,423

687

* Consolidated starting from September 2012

Lawson urbanworks, Inc. (consolidated subsidiary)
In March 2018, through corporate division with Lawson Inc. as a succeeding company
and corporate division where the succeeding company is a fully owned subsidiary that
Lawson established called Lawson urbanworks, Inc. (“Urbanworks”) a portion of CVS
Bay Area Inc. s convenience store operations was transferred.
Urbanworks operates stores mainly in Tokyo and Chiba prefectures, and thenumber of stores at the end of the fiscal year ending February 29, 2020 was 71 (adecrease of 3 stores from the end of the previous fiscal year).
■Lawson Urban Works, Inc.
(Millions of Yen)
(Fiscal Year)

2020.2

2019.2Gross operating revenues

15,47015,979Operating income (loss)

56

（21）

Net income

34

7

13

Lawson, Inc. MD&A 2020

* Lawson Sanin, Inc. was merged into Lawson Inc. on March 1, 2020

■ Lawson Sanin, Inc.

(Millions of Yen)

* Income began to be reflected in the consolidated accounts, starting from November 2016

Lawson Okinawa, Inc. (equity-method affiliate)
Through business alliance with SAN-A CO., LTD. ( “ SAN-A ” ), a retailer withoverwhelming customer support in Okinawa prefecture that has unique lifestyle andfood preferences, aiming to deliver services better suiting local needs and to offer amerchandise and store environment befitting local consumer tastes, we established
Lawson Okinawa, Inc. in October 2009 as a wholly-owned subsidiary of Lawson, Inc.
Subsequently, in December 2009, 51% of the total shares outstanding in Lawson
Okinawa, Inc. were sold to SAN-A for the former to be run as a joint venture.
For the year ended February 29, 2020, Lawson Okinawa, Inc. had a total of
239 stores at the period-end date (an increase of 6 stores compared to the year-ago
period), and operating income stood at 1.7 billion yen. We will continue to have Lawson
Okinawa, Inc. strive to build a store environment meeting local needs appropriately,
thus growing Lawson chain stores in Okinawa in the coming years.
■Lawson Okinawa, Inc.

(Millions of Yen)

(Fiscal Year)

2020.2

2019.22018.22017.2

2016.2

2015.2Gross operating revenues

8,264

7,700

7,090

6,509

5,605

4,674

Operating income

1,798

1,824

1,658

1,637

1,407

1,183

Net income

1,172

1,107

1,069

1,081

954

738

Financial Section

Lawson Minamikyushu, Inc. (equity method affiliate)
Lawson Minamikyushu, Inc. (“Lawson Minamikyushu”) was established in May 2013 asa wholly-owned subsidiary of Lawson, Inc. before launching Lawson store operationsin Kagoshima in August the same year. Subsequently, in March 2014, Nangoku
Corporation (“Nangoku* Consolidated starting from February 2013) took a 51% equity
participation in Lawson Minamikyushu (Lawson, Inc.ʼs equity interest ratio became 49%)
to integrate Lawson, Inc.ʼs Kagoshima operations before starting to run Lawson storesin the prefecture.
For the year ended February 29, 2020, the number of LAWSON stores stood at
195 at the period-end date (a decrease of 2 stores compared to the year-ago period),
and operating income stood at 100 million yen. 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 Minamikyushu, Inc.

(Millions of Yen)

(Fiscal Year)

2020.2

2019.22018.22017.2

2016.2Gross operating revenues

4,602

4,412

4,317

4,007

3,756

3,595

Operating income (loss)

196

156

162

94

（183）

（422）

Net income (loss)

67

95

111

（93）

（591）

（472）

2015.2* Income began to be reflected in the consolidated accounts, starting from March 2014

Lawson Kochi, Inc. (equity-method affiliate)
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 the parent of Three-F Chu-Shikoku Co., Ltd. This was followed
by SUNNY MART converting Three-F stores operated 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 the latterholding 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.
For the year ended February 29, 2020, the number of LAWSON stores in theprefecture stood at 139 at the period-end date (a decrease of 1 store compared to theyear-ago period), and the operating income of Lawson Kochi, Inc. amounted to 400
million yen. We will continue to have Lawson Kochi strive to build a store environment

meeting local needs appropriately, thus growing Lawson chain stores in Kochi in the
coming years.
■Lawson Kochi, Inc.

(Millions of Yen)

(Fiscal Year)

2020.2

2019.22018.22017.2

2016.2Gross operating revenues

4,426

4,388

4,321

4,482

4,208

Operating income

411

387

498

463

430

Net income

269

300

290

298

286

* Income began to be reflected in the consolidated accounts, starting from April 2015

SEIJO ISHII CO., LTD. (consolidated subsidiary)
The company became a wholly-owned subsidiary of Lawson, Inc. in October 2014.
The number of company-operated stores reached 154 as of the end of February 2020
(an increase of 8 stores compared to the year-ago period). Its well-selected original
delicatessen items have been popular among many customers and sales have beensolid.
With regard to performance of the year ended February 29, 2020, due mainly tostable sales of original delicatessen and dessert items, sales of existing stores werefavorable as 102.9% compared to the previous fiscal year and operating income stoodat 9.1 billion yen, an increase of 900 million yen compared to the previous fiscal year.
Leveraging its strengths such as product development capabilities, knowhow asa manufacturing retailer and sales techniques, the company will continue to strive toenhance the brand appeal of Seijo Ishii.
■ SEIJO ISHII CO., LTD.

(Millions of Yen)

(Fiscal Year)

2020.2

2019.22018.22017.2

2015.122014.12Gross operating revenues

93,76987,22981,95785,824

68,993

17,881

Operating income

9,105

8,171

7,611

7,795

5,795

1,547

Net income

5,348

4,885

4,339

4,616

2,625

1,086

* Consolidated starting from October 2014

Lawson, Inc. MD&A 202014

Lawson Entertainment, Inc. (consolidated subsidiary)
Lawson Entertainment, Inc. ( Lawson 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 and sporting event ticket sales. Holding a top-class position in theindustry in ticket sales quantity, Lawson Entertainment has been expanding its operations ina steady manner.
Established in 1992 as RIZA JAPAN, primarily a ticket distributor, the company
changed its name to Lawson Ticket in 1996 before being included in Lawson, Inc.ʼs scopeof consolidation as a subsidiary in 1997. In July 2009, the company changed its name to
Lawson Entermedia, Inc. It was listed on the Osaka Securities Exchange JASDAQ Market
but was delisted in June 2010. The company then became 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 and e-commerce (EC) businesses of the Lawson Group, going
forward. In June 2018, the corporate name was changed to Lawson Entertainment, Inc.
We leverage the Groupʼs solid e-commerce business platform to provide one-stop
shopping convenience to customers by enabling those buying concert tickets and CDs fora 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 musicindustry and Lawson Ticketʼs prowess in the ticket distribution industry.
As for Lawson Entertainmentʻs revenue structure, commission revenues on ticket sales
currently account for the bulk of its revenues. Its operating revenues mainly comprisingcommissions are recorded as operating revenues-other in the consolidated statement ofincome of Lawson, Inc.
For the year ended February 29, 2020, operating income stood at 2.3 billion yen which
was about the same level with the previous fiscal year.
■ Lawson Entertainment, Inc.

(Millions of Yen)

(Fiscal Year)

2020.2

2019.22018.22017.2

2016.2

2015.2Gross operating revenues

58,53954,54153,26150,42350,20546,018Operating income

2,367

2,335

1,851

2,119

2,469

3,094

Net income

2,867

2,470

1,524

1,466

1,644

2,918

15

Lawson, Inc. MD&A 2020

United Cinemas Co., Ltd. (consolidated subsidiary)
In August 2014, Lawson, Inc. acquired all shares in United Cinemas Co., Ltd. (“UC”),
a cinema operator, in a deal conducted via a newly established subsidiary of present
Lawson Entertainment, Inc. Adding the industryʼs top-class firm, UC, 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 collaboratingwith movie contents holders and encouraging its Lawson, HMV, e-commerce andcinema operations to guide customers to each otherʼs service.
For the year ended February 29, 2020, operating income was 3.4 billion yen, due
mainly to hit films.
■United Cinemas Co., Ltd.

(Millions of Yen)

(Fiscal Year)

2020.2

2019.22018.22017.2

2016.2

2014.12Gross operating revenues

26,97023,65322,243

22,637

24,9605,773

Operating income

3,457

2,675

2,512

2,457

2,338

156

Net income (loss)

2,245

2,687

1,694

2,137

2,260

（112）

* Consolidated starting from September 2014

Financial Section

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 installed jointly operated ATMs in LAWSON stores through an absorption-typecompany split. In July 2018, the corporate name was changed to Lawson Bank, Inc.
and it started providing services to customers in October 2018. In the jointly operated
ATM business, the company focused on strengthening cooperation with financial
institutions, and as of end February 2020, the number of ATMs in operation nationwide
totaled 13,353, while as for the number of partner financial institutions, the number of
direct partners totaled 124 nationwide. Also, in order to contribute to the developmentof local communities and economy, in cooperation with regional financial institutions,replacement of their ATMs with Lawson Bank ATMs was promoted.
In the retail business, the company focused on deposit account service by sales
promotion such as fixed deposit account campaign and strategic revisions to intereston ordinary savings account. Also, the company strengthened LAWSON Ponta Plus
credit card initiative by offering revised points in accordance with the cashless point
rebate program.
For the year ended February 29, 2020, segment profit of Financial service
business stood at 3.0 billion yen due mainly to increased revenue in accordance withincreased number of ATMs in operation and reduction of costs such as ATM operation
cost.

Shanghai Lawson, Inc. (consolidated subsidiary)
At the invitation of the Shanghai city, we were the first Japanese convenience store
company to gain a foothold in China and 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 Hualian Group Co., Ltd. (“Hualian Group”), a
Shanghai city government-related company, the remaining 30.0% equity stake in it.
In 2004, we transferred 21.0% of equity interest in Shanghai Hualian Lawson (outof our 70.0% equity interest in the firm) to the Hualian Group, reducing our ownershipin it to 49.0%. However, in September 2011, in order to reinforce the Japanese-style
convenience store concept in China (Shanghai city), we brought our equity interestin Shanghai Hualian Lawson to 85.0% and the company was included in Lawson,
Inc.ʼs scope of consolidation as a subsidiary. Aiming at strengthening and expanding
our China business, this was performed in order to accelerate its efforts to pursue
the Japanese-style convenience store business model that is superior in productdevelopment, customer interaction, and cleanliness.
Subsequently, our equity interest was raised to 100% in February 2017 andcorporate name was changed to Shanghai Lawson, Inc.
The total number of LAWSON stores stood at 1,574 as of February 29, 2020 (anincrease of 347 stores compared to the year-ago period).
For the year ended December 31, 2019, the company secured positive operating
income while absorbing large store opening cost.
■ Shanghai Lawson, Inc.

(Millions of Yen)

(Fiscal Year)2019.122018.122017.122016.122015.12Gross operating revenues

33,60524,35919,905

13,561

8,531

1,360

73

28

（567）

（555）

（755）

（646）

(488)

（241）

（1,025）（1,347）（1,099）（925）

Operating income (loss)
Net income (loss)

2014.12* 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 to the profit (loss)of Shanghai Lawson, Inc.

Lawson, Inc. MD&A 202016

Chongqing Lawson, Inc. (consolidated subsidiary)
We established Chongqing Lawson, Inc. in April 2010 to gain a foothold in inland Chinaas the first Japanese convenience store company to operate there at the invitation of
the city of Chongqing and the first local LAWSON store was opened. The LAWSON
store network has continued to grow steadily since, bringing the total store countto 235 as of February 29, 2020 (an increase of 37 stores compared to the year-ago
period). For the year ended December 31, 2019, the company decreased operating
loss while absorbing store opening cost.
■ Chongqing Lawson, Inc.

(Millions of Yen)

(Fiscal Year)2019.122018.122017.122016.122015.122014.12Gross operating revenues

3,104

3,461

3,225

3,586

4,400

3,474

Operating income (loss)

(101)

（282）

（306）

（452）

（778）

（904）

Net income (loss)

(245)

（378）

（413）

（623）

（973）

（1,047）

Dalian Lawson, Inc. (consolidated subsidiary)
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 withlocal 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 192 as of February 29, 2020 (anincrease of 46 stores compared to the year-ago period). For the year ended December
31, 2019, operating income turned positive as an increase of franchise stores improved
profit, among other factors.
■ Dalian Lawson, Inc.
(Fiscal Year)(Millions of Yen)
2019.122018.122017.122016.122015.122014.12Gross operating revenues

3,298

2,463

2,371

2,043

1,502

995

Operating income (loss)

13

0

4

（183）

（312）

（313）

Net income (loss)

(32)

（31）

（28）

（190）

（344）

（338）

17

Lawson, Inc. MD&A 2020

Beijing Lawson, Inc. (consolidated subsidiary)
We established Beijing Lawson, Inc. in May 2013. The total number of stores stoodat 153 as of February 29, 2020 (an increase of 45 stores compared to the year-ago
period). For the year ended December 31, 2019, the company decreased operating
loss while absorbing store opening cost.
■ Beijing Lawson, Inc.

(Millions of Yen)

(Fiscal Year)2019.122018.122017.12Gross operating revenues

4,942

4,480

3,106

2,168

Operating income (loss)

(261)

（463）

（635）

（643）

Net income (loss)

(313)

（591）

（687）

（634）

2016.12* Beijing Lawson, Inc. has been included in the scope of consolidation from 2016. The operating
result above of Beijing Lawson, Inc. includes the operating 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 principally with the SAHA Group, Thailand ʼ s leading consumer goods
distributor. In March 2013, this joint venture launched Lawson convenience stores
under the LAWSON 108 brand in Bangkok. The number of stores stood at 133 asof February 29, 2020 (an increase of 13 stores compared to the year-ago period). For
the year ended December 31, 2019, the company decreased operating loss whileabsorbing store opening cost.
■Saha Lawson Co., Ltd.

(Millions of Yen)

(Fiscal Year)2019.122018.122017.122016.122015.12Gross operating revenues

10,792

9,851

8,271

7,171

6,962

7,800

Operating income (loss)

(267)

（299）

（653）

（305）

（251）

（655）

Net income (loss)

(282)

（280）

（767）

（396）

（308）

（831）

* Consolidated starting from January 20132014.12Financial Section

Our Initiatives for SDGs
Based on our corporate philosophy “ Creating Happiness and Harmony in Our
Communities, On March 1, 2019, we established the SDGs Committee aiming torealize a sustainable society through Lawson s business activities. Centering on thisCommittee we have promoted initiatives leading to solutions for social issues througha step by step approach. Specifically, we clarified issues with heavy impacts on theenvironment, society and economy in our business activities including our value chain,
identified social issues with high priority, and then determined Lawson ʼs own six
material issues.
＜Lawsonʼs Six Material Issues＞

1. Providing Safety/Security-Oriented Overwhelmingly High Value-Added Products
and Services Friendly to Society and the Environment
2. Supporting Health Promotion for All People Through Products and Stores
3. Providing Comfortable Work Environment Leading to Job Satisfaction
4. Supporting Women, Senior People as well as Childrenʼs Growth
5. Coexisting Synergistically with Communities by Serving as Part of Social
Infrastructure
6. Sustainable Environment Preservation Activities Toward Carbon-Free Society
In particular, regarding the sixth Material Issue (Sustainable Environment Preservation
Activities), as social environment issues, Goals for 2030 (KPI) have been set as
goals (KPIs) focusing on: (1) Reducing food waste, (2) Reducing plastic (for containers
and packaging) and (3) Reducing CO2 emissions, and we are addressing initiative. In
addition, aiming for achieving a better world by 2050, under the theme of Lawson
Blue Challenge 2050! - Save our blue planet! we take on more difficult challenges
to contribute to achieve higher goals so that we can create a carbon-free society andcontribute to the ideal world that the SDGs aim to realize.
Issues2030 KPI

2050 KPI

Reducing food waste

Reduce by 50% v. 2018 levels

Reduce by 100%

Reducing plastic

For reducing food waste, a food loss reduction experiment Another Choice wasconducted at 216 stores in Ehime prefecture and 236 stores in Okinawa prefecture for
82 days from June 11 to August 31, 2019, for a total of 452 stores (as of the end of
August 2019). As a result, 3,254,673 yen from Ehime prefecture and 5,036,165 yen
from Okinawa prefecture, a total of 8,290,838 yen was donated to support childrenʼssummer vacation meals.
For reducing plastic, in addition to replacing plastic S size cups of iced coffee forin-store freshly brewed coffee service MACHI café” with paper cups, we also adopted
a lid that does not require a straw. With these actions, 8g plastic for 1 cup can be
reduced.
As for plastic shopping bags, from July 1, 2020, it becomes mandatory to charge
for plastic shopping bags nationwide. In accordance with this change, we charge 3
yen for each plastic shopping bag, and at the same time, we are working to reduce
plastics by blending 30% of plant-derived materials.
In order to prevent global warming and reduce the amount of electricity used instores, we promoted the introduction of non-fluorocarbon (CO2 refrigerant) freezer/
refrigeration system and the system was installed to approximately 3,700 stores by
the end of February 2020 (an increase of approximately 300 stores compared to theyear-ago period).
Other than above, we are maintaining Scholarship Program for children fromsingle-parent families to support the dreams of students who have difficulty paying
school tuitions in single-parent families, and 400 students were selected and offered
scholarship for fiscal year 2019. Also, we conducted fund-raising campaigns in theevent of a disaster such as Typhoon No. 15 and Typhoon No. 19, and in the event of
the Shurijo Castle Fire in Okinawa Prefecture, we placed donation boxes at stores orother places in Okinawa Prefecture to raise fund.
As a member of society, Lawson Inc. will continue to work with franchise stores,
customers and business partners to contribute to the promotion of the SDGs throughinitiatives to resolve social and environmental issues.

Reduce by 30% v. 2017 levels * For Lawsonʼs original products,(*plastic for containers andpackaging)* For Lawsonʼs original products,
eco-friendly materials: 50% usageeco-friendly materials: 100% usage

Reducing plastic(for plastic shopping bags)

Reduce by 100% v. 2017 levels
for plastic shopping bags―

Reducing CO2 emissions

Reduce by 30% v. 2013 levels

Reduce by 100%

Lawson, Inc. MD&A 202018

Consolidated Balance Sheet
Lawson, Inc. and its Consolidated Subsidiaries
February 29, 2020

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

2020

2020

2019

Cash and cash equivalents¥343,583¥354,236$3,139,751

4

4

37

Due from franchised stores (Note 3)

47,36747,180432,852

Other

162,142

124,067

1,481,696

(43)

(124)

(393)

Lease receivables (Note 4)

17,877

19,121

163,365

Inventories

20,985

20,862

191,766

Time deposits
Accounts receivable:

Allowance for doubtful accounts

Other
Total current assets

44,78354,258409,239

636,698

619,604

5,818,313

PROPERTY AND STORE EQUIPMENT:Land (Notes 6 and 7)

8,913

9,053

81,449Buildings (Note 6)

387,223

387,9813,538,545

Furniture, fixtures, and equipment (Note 6)

79,18874,729723,641

Lease assets (Note 6)

261,556

252,577

2,390,167

Other (Note 6)

22,875817

209,038

Total

759,755

725,157

6,942,840

Accumulated depreciation(366,817)(342,857)(3,352,070)

392,938

382,300

3,590,770

Investment securities (Note 5)

9,948

13,54990,907

Investments in associated companies

20,51818,297

187,499

Long-term loans receivable

42,48844,024388,266

Goodwill (Note 6)

42,382

46,836387,298

Software (Note 6)

45,152

49,792412,611

Net property and store equipment
INVESTMENTS AND OTHER ASSETS:

19

Lawson, Inc. MD&A 2020

Millions of Yen
ASSETS

CURRENT ASSETS:

Thousands of
U.S. Dollars(Note 1)

2020

2019

2020

Trademark right

8,850

9,468

80,874

Lease deposits

107,193

107,034

979,558

Deferred tax assets (Note 15)

34,37830,995314,155

Other (Note 6)

17,81821,266

162,825

(630)

(835)

(5,757)

Allowance for doubtful accounts
Total investments and other assets
TOTAL* See notes to consolidated financial statements.
* Figures are rounded off less than a unit.

328,097

340,426

2,998,236¥1,357,733¥1,342,330$12,407,320

Financial Section

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

2020

2020

2019

Accounts payable:
Trade (Notes 8 and 19)¥129,398¥123,409$1,182,473

Due to franchised stores (Note 9)

1,860

1,611

16,997

Other

94,448

101,693863,091

Short-term loans (Note 10)

39,850126,600

364,160

Current portion of long-term debt (Note 10)45,61088,750416,796

Income taxes payable

7,916

6,684

72,338Deposits received

193,097

131,805

1,764,571

Other (Note 12)49,784

17,971454,939561,963598,523

5,135,365

Total current liabilities

Net defined benefit liability (Note 11)

16,24615,126

148,460

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

283

301

2,586

Long-term debt (Note 10)446,666

391,441

4,081,751

Asset retirement obligations (Note 12)35,336

31,102322,910

522

551

4,770

21,37023,304

195,285

520,423

461,825

4,755,762

Common stock̶authorized, 409,300,000
shares in 2020 and 2019; issued,
100,300,000 shares in 2020 and 201958,50758,507534,652

Capital surplus

44,60546,984

407,612

Other
Total long-term liabilities

LIABILITIES AND EQUITY

2020

2020

2019

(1,011)(1,029)(9,238)Net unrealized gain on available-for-salesecurities

1,497

3,349

13,680Land revaluation difference (Note 7)

(208)

(567)

(1,901)

Foreign currency translation adjustments

3,341

3,931

30,531

Defined retirement benefit plans

(935)

(848)

(8,544)271,133

276,7312,477,684

4,214

5,251

38,509

Accumulated other comprehensive
income:Total
Noncontrolling interests
Total equity
TOTAL

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

Millions of Yen
Treasury stock̶at cost, 237,762 shares in2020 and 241,897 shares in 2019

CURRENT LIABILITIES:

Thousands of
U.S. Dollars(Note 1)

275,347

281,982

2,516,193¥1,357,733¥1,342,330$12,407,320* See notes to consolidated financial statements.
* Figures are rounded off less than a unit.

EQUITY (Note 13):

Stock acquisition rights
Retained earnings

256

216

2,339

165,081

166,188

1,508,553

Lawson, Inc. MD&A 202020

Consolidated Statement of Income
Lawson, Inc. and its Consolidated Subsidiaries
Year Ended February 29, 2020

Thousands of
U.S. Dollars(Note 1)Millions of Yen
2020

2020

2020

2019

INCOME TAXES (Note 15):

Franchise commissions from
franchised stores¥314,261¥302,136$2,871,799

Net sales

302,843

288,580

2,767,459

Other113,133

109,932

1,033,839

730,237

700,648

6,673,097

Total operating revenues

Millions of Yen

2020

2019

OPERATING REVENUES:

Thousands of
U.S. Dollars(Note 1)COSTS AND OPERATING EXPENSES:
Cost of sales (Note 19)

205,746

198,040

1,880,161

Selling, general, and administrative expenses

461,548441,826

4,217,746

Total costs and operating expenses

667,294

639,866

6,097,907

Operating income

62,94360,782575,189

Current

12,814

18,329117,098

Deferred(2,563)(4,015)(23,422)

10,251

14,314

93,676

20,06925,563

183,396

(39)

(23)

(357)

¥20,108¥25,586$183,752

Total income taxes
NET INCOME
NET INCOME ATTRIBUTABLE TONONCONTROLLING INTERESTSNET INCOME ATTRIBUTABLE TOOWNERS OF THE PARENT

Yen
2020

OTHER INCOME (EXPENSES):Interest expense̶net(3,284)(1,735)(30,010)Compensation income

681

382

6,223

(3,675)(1,655)(33,583)

571

321

Loss on cancellation of leases
Equity in earnings of unconsolidated
subsidiaries and associated companies¥200.95¥255.71$1.84

Net income̶diluted

200.84255.59

1.84

5,218

Cash dividends applicable to the year

202.5

255

1.85

* See notes to consolidated financial statements.
* Figures are rounded off less than a unit.

165

738

1,508

Loss on sales of non-current assets

(508)

(225)

(4,642)

Loss on disposal of property andstore equipment(6,121)(4,142)(55,935)

Impairment of long-lived assets (Note 6)(18,722)(13,892)(171,087)

Other expenses̶net
INCOME BEFORE INCOME TAXES

21

Lawson, Inc. MD&A 2020

PER SHARE OF COMMON STOCK(Notes 2.t and 21):
Net income̶basic

Gain on sales of investment securities

Other̶net

U.S. Dollars
2020

2019

(1,730)(697)(15,809)(32,623)(20,905)(298,118)

30,32039,877

277,072

Financial Section

Consolidated Statement of Comprehensive Income
Lawson, Inc. and its Consolidated Subsidiaries
Year Ended February 29, 2020

Thousands of
U.S. Dollars(Note 1)Millions of Yen
2020
NET INCOME

2020

2019

¥20,069¥25,563$183,396(1,852)

1,265(16,924)

Foreign currency translation adjustments

(543)

(674)

(4,962)Remeasurements of defined benefit plans

(87)

19

(795)

OTHER COMPREHENSIVE INCOME:
Unrealized gain (loss) on available-for-salesecurities
Land revaluation difference

Total other comprehensive income
COMPREHENSIVE INCOME(2,482)

610(22,681)¥17,587¥26,173$160,715¥17,580¥26,204$160,651

7

(31)

64

TOTAL COMPREHENSIVE INCOME
ATTRIBUTABLE TO (Note 17):
Owners of the parent
Noncontrolling interests* See notes to consolidated financial statements.
* Figures are rounded off less than a unit.

Lawson, Inc. MD&A 202022

Consolidated Statement of Changes in Equity
Lawson, Inc. and its Consolidated Subsidiaries
Year Ended February 29, 2020
Thousands of Shares/Millions of Yen
Common Stock

SharesBALANCE, FEBRUARY 28, 2018

100,300

Amount¥58,507

Accumulated other comprehensive income

Treasury Stock

CapitalSurplus¥46,690

Stock
Acquisition
RightsRetained
Earnings¥195¥166,125

Net income attributable to ownersof the parent

SharesNet Unrealized
Gain (Loss)on Available-for- Land Revaluation
Sale Securities
Difference

Amount(244)¥(1,041)¥2,084¥(576)

Foreign
Currency
Translation
Adjustments

Remeasurementsof defined
benefit plans¥4,596¥(727)

Noncontrolling
Interests

Total¥275,853¥5,593Total
Equity¥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

(9)

(9)

(1)

(1)

(1)

13

17

17

0

0

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, 20193

21
100,300¥58,507¥46,984¥216¥166,188

100,300

58,507

46,984¥216

165,595

Cumulative effects of changes
in accounting policies
Restated balance

9

(665)

(121)

509

(342)

167

¥5,251¥281,982

5,251

281,388(241)¥(1,029)¥3,349¥(567)¥3,931¥(848)¥276,731(241)(1,029)

3,349

(567)

3,931

(848)

276,136(593)

Net income attributable to ownersof the parent

0

1,265

(593)

(593)

20,108

20,108(2,375)(2,375)Year-end cash dividends, ¥127.5 per share(12,758)(12,758)(12,758)

Interim cash dividends, ¥75.0 per share(7,505)(7,505)(7,505)

Reversal of land revaluation difference

(359)

(359)

(359)

(1)

(1)

Change in the parentʼs ownershipinterest due to transactions
with noncontrolling interests(2,375)Purchase of treasury stock(1)

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

Others̶net
BALANCE, FEBRUARY 29, 202023

Lawson, Inc. MD&A 2020

4

19

40
100,300¥58,507¥44,605¥256¥165,081(237)¥(1,011)

20,10815

15(1,852)

359

(590)

(87)

(2,130)(1,037)(3,167)¥1,497¥(208)¥3,341¥(935)¥271,133¥4,214¥275,347

Financial Section

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

BALANCE, FEBRUARY 28, 2019

CommonStockCapitalSurplus$534,652$429,352

Stock
Acquisition
RightsRetained
Earnings$1,974$1,518,669

Cumulative effects of changes
in accounting policies
Restated balance

TreasuryStock$(9,403)

Net Unrealized
Gain (Loss)on Available-for- Land Revaluation
Sale Securities
Difference$30,604$ (5,181)

Foreign
Currency
Translation
Adjustments

Remeasurementsof defined benefit
plans$35,923$ (7,749)$534,652$429,352$1,974$1,513,250$2,528,841$47,985(5,419)(5,419)Net income attributable to ownersof the parent

Noncontrolling
Interests

Total$(9,403)$30,604$(5,181)$35,923$(7,749)$2,523,422

Total
Equity$2,576,826(5,419)$47,985$2,571,407

183,752

183,752(21,703)(21,703)Year-end cash dividends, $1.17 per share(116,586)(116,586)(116,586)

Interim cash dividends, $0.69 per share(68,583)(68,583)(68,583)

Reversal of land revaluation difference(3,280)(3,280)(3,280)(9)(9)

Change in the parentʼs ownershipinterest due to transactions
with noncontrolling interests(21,703)

Purchase of treasury stock(9)

Exercise of stock acquisition rights to shares(delivery of treasury stock)(37)

Others̶net
BALANCE, FEBRUARY 29, 2020

174
365

$534,652$407,612$2,339$1,508,553$(9,238)

183,752

137

137(16,924)

3,280(5,392)(795)(19,466)(9,476)(28,942)$13,680$ (1,901)$30,531$(8,544)$2,477,684$38,509$2,516,193* See notes to consolidated financial statements.
* Figures are rounded off less than a unit.

Lawson, Inc. MD&A 202024

Consolidated Statement of Cash Flows
Lawson, Inc. and its Consolidated Subsidiaries
Year Ended February 29, 2020

Thousands of
U.S. Dollars(Note 1)Millions of Yen
2020
Income before income taxes andminority interests

2020
(129)

(5,757)

Proceeds from sales of investment securities

243

7,157

2,221

(2,246)(3,597)(20,525)¥39,877$277,072

Income taxes paid

(11,436)(18,706)(104,505)

Depreciation and amortization

79,183

66,844

723,595

Impairment of long-lived assets

18,722

13,892

171,087

Loss on disposal of property andstore equipment

6,121

4,142

55,935

Net iincrease (decrease)in short-term loans payable(38,594)(41,112)(352,682)

Repayments of long-term debt

(896)

53,697(8,188)Cash dividends paid

61,293

22,179560,111

Increase (decrease) in accounts payable
Increase in deposits received
Increase in allowance for retirement
benefits to employees and executive
officers and audit and supervisoryboard members

Acquisition of associated companies
Payments for transfer of business
Other̶net(1,179)(2,731)
(950)

(905)

(8,681)(49,074)(81,018)(448,451)(86,750)

90,260(792,744)(103,319)(46,727)(944,156)(20,263)(25,514)(185,169)

Proceeds from long-term loan-payable

50,000260,000

456,913

Payments from changes in ownershipinterests in subsidiaries that do not resultin changes in scope of consolidation(3,521)

Net cash used in investing activities
FINANCING ACTIVITIES:

Changes in assets and liabilities:
Increase in accounts receivable

2020

2019

Purchase of investment securities¥30,320

Adjustments for:766

Net increase (decrease) in call loans
for banking business

10,000Net increase in call moneyfor banking business

19,000906(20,000)

7,000
91,383
173,627

Other̶net
Net cash provided by (used in)financing activities(32,176)

(58)

(82)

(529)

(163,911)

277,937(1,497,862)(372)(1,409)(3,399)28,225

6,876

257,927

Total adjustments

172,384

88,718

1,575,290

FOREIGN CURRENCY TRANSLATIONADJUSTMENTS ON CASH AND CASH
EQUIVALENTS

Net cash provided by operating
activities

202,704

128,595

1,852,362

NET INCREASE（DECREASE）IN CASH
AND CASH EQUIVALENTS(10,653)

324,105(97,350)

CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR

354,236

30,121

3,237,101

Other̶net

INVESTING ACTIVITIES:
Purchases of property and store equipment(33,852)(43,284)(309,348)

Purchases of software and otherintangible assets(10,931)(18,060)(99,890)

Increase in long-term loans receivable(5,961)(7,389)(54,473)

Proceeds from collection of long-termloans receivable

5,736

5,111

52,417

Payments for guarantee deposits(18,023)(24,239)(164,699)

Proceeds from collection ofguarantee deposits

17,836

18,428

162,990

Long-term prepaid expenses(797)(5,752)(7,283)25

Millions of Yen

2020

2019

OPERATING ACTIVITIES:

Thousands of
U.S. Dollars(Note 1)

Lawson, Inc. MD&A 2020

CASH AND CASH EQUIVALENTS IN
SUBSIDIARIES RESULTING FROMCHANGES IN SCOPE OF CONSOLIDATIONCASH AND CASH EQUIVALENTS,
END OF YEAR
* See notes to consolidated financial statements.
* Figures are rounded off less than a unit.

10¥343,583¥354,236$3,139,751

Financial Section

Notes to Consolidated Financial Statements
Lawson, Inc. and its Consolidated Subsidiaries
Year Ended February 29, 2020

1 BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESThe accompanying consolidated financial statements have been prepared ina. Consolidation ̶ 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 2019) 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, which are different in certain

accompanying consolidated financial statements.

respects as to application and disclosure requirements from International 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 2019

Investments in three (three in 2019) associated companies are accounted for byfinancial statements to conform to the classifications used in 2020.

the equity method. Investments in 22 (22 in 2019) 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 ¥109.43

All significant intercompany balances and transactions have been eliminatedto $1, the approximate rate of exchange at February 29, 2020. 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 Companyʼs 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 29, 2020, 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 202026

b. Fiscal Year End of the Consolidated Subsidiaries ̶ 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 Lawson,

accounting.

Inc.; and BEIJING LUOSONG Co., Ltd. is December 31. In order to prepare theconsolidated financial statements, the Company used these companiesʼ financial

d. Unification of Accounting Policies Applied to Foreign Associated Companies

statements prepared as of such fiscal year end, and significant transactions which

Accounted for by Using the Equity Method ̶ In March 2008, the ASBJ issued

occur between December 31 and the consolidated fiscal year end are adjusted as

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

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 theassociateʼs accounting policies for similar transactions and events under similar

consolidated financial statements, the Company used this subsidiaryʼs provisional

circumstances to those of the parent company when the associateʼs financial

settlement of accounts as of the Companyʼs 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 Statements ̶ 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 Combinations ̶ 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 2020

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 storeʼs 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 parentʼs 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

parentʼs ownership interest in its subsidiary while the parent retains its controlling“Operating revenues ̶ Franchise 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 Commissions ̶As 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 ʼs 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 202028

g. Cash and Cash Equivalents ̶ Cash and cash equivalents include cash on hand,k. Long-Lived Assets ̶ 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 Securities ̶ 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. Software ̶ 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 Rights̶Trademark 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 Liability ̶ 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 stated at cost,

except for land (see Note 7). Depreciation is computed mainly by the straight-line

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

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

Actuarial differences are mainly amortized from the following fiscal year on a

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 2020

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 Members ̶ 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 Taxes ̶ The Companies provide for income taxes applicable to all items
p. Asset Retirement Obligations ̶ 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 adopted the consolidated

the obligation is incurred if a reasonable estimate can be made. If a reasonabletaxation system.

estimate of the asset retirement obligation cannot be made in the period theasset retirement obligation is incurred, the liability should be recognized whens. Foreign Currency Financial Statements ̶ The balance sheet accounts ofa reasonable estimate of asset retirement obligation can be made. Upon initialassociated companies denominated in foreign currencies are translated into

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

Japanese yen at the current exchange rate as of the balance sheet date, except

is capitalized by increasing the carrying amount of the related fixed asset by thefor equity, which is translated at the historical rate. Differences arising fromamount of the liability. The asset retirement cost is subsequently allocated tosuch translation are shown as “Foreign currency translation adjustments” andexpense through depreciation over the remaining useful life of the asset. Over time,“Noncontrolling interests” in separate components of equity. Revenue and expense

the liability is accreted to its present value each period. Any subsequent revisions

accounts of affiliated companies denominated in foreign currencies are translated

to the timing or the amount of the original estimate of undiscounted cash flows areinto yen at the current exchange rate.

reflected as an adjustment to the carrying amount of the liability and the capitalized
amount of the related asset retirement cost.

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

income available to common shareholders by the weighted-average number ofq. Stock Options ̶ Compensation expenses for employee stock options which werecommon shares outstanding for the period.

granted on and after May 1, 2006 are recognized based on the fair value at theLawson, Inc. MD&A 2020

30

The number of shares used in computing net income per share was 100,061
thousand shares for 2020 and 100,057 thousand shares for 2019.

(2) Changes in presentation
When the presentation of financial statements is changed, prior-period financial
statements are reclassified in accordance with the new presentation.

Diluted net income per share for the years ended February 29, 2020 and February
28,2019 was computed by using the weighted-average number of common(3) Changes in accounting estimatesshares outstanding adjusted to include the potentially dilutive effect of stock

A change in an accounting estimate is accounted for in the period of

options that were outstanding during the year.

the change if the change affects that period only, and is accounted forprospectively if the change affects both the period of the change and future

Cash dividends per share presented in the accompanying consolidated statement

periods.

of income are dividends applicable to the respective years including dividends tobe paid after the end of the year.

(4) Corrections of prior-period errors
When an error in prior-period financial statements is discovered, thoseu. Accounting Changes and Error Corrections ̶ In December 2009, the ASBJ

statements are restated.

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

v. New Accounting Pronouncements

Standard for Accounting Changes and Error Corrections.” Accounting treatments

Accounting Standard for Revenue Recognition

under this standard and guidance are as follows:

On March 30, 2018, the ASBJ issued ASBJ Statement No. 29, “AccountingStandard for Revenue Recognition,” and ASBJ Guidance No. 30, “Implementation(1) Changes in accounting policies

Guidance on Accounting Standard for Revenue Recognition.” The core principle

When a new accounting policy is applied following the revision of anof the standard and guidance is that an entity should recognize revenue to depict

accounting standard, the new policy is applied retrospectively unless thethe transfer of promised goods or services to customers in an amount that reflects

revised accounting standard includes specific transitional provisions, in which

the consideration to which the entity expects to be entitled in exchange for thosecase the entity shall comply with the specific transitional provisions.

goods or services. An entity should recognize revenue in accordance with thatcore principle by applying the following steps:

The Companyʼs foreign consolidated subsidiaries have applied International
Financial Reporting Standard 16 (IFRS 16), “Leases,” from the fiscal year

Step 1: Identify the contracts with a customer

ended February 29, 2020.IFRS16, “Leases,” requires lessees to recognize

Step 2: Identify the performance obligations in the contract

most leases on the balance sheet thereby resulting in the recognition of lease

Step 3: Determine the transaction priceassets and liabilities.

Step 4: Allocate the transaction price to the performance obligations in the

The impact of the application of IFRS 16 on the Companyʼs consolidated
financial statements is immaterial.

contract
Step 5: Recognize revenue when or as the entity satisfies a performanceobligation

31

Lawson, Inc. MD&A 2020

Financial Section

The Company expects to apply the accounting standard and guidance for annual“Investments and other assets” and 551million yen of “Deferred tax liabilities” underperiods beginning on March 1, 2022, and is in the process of measuring the“Long-term liabilities.”

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

(Consolidated Statement of Income)In the “ Other income (expenses) ” section, “ Loss on disaster ” was presented

Accounting Standard for Fair Value Measurement

separately in the previous fiscal year. Due to a decline in financial materiality, “Loss

On July 4, 2019, the ASBJ issued ASBJ Statement No. 30, “Accounting Standard

on disaster” is now included in “Other-net”. To reflect these changes in method of

for Fair Value Measurement ” and ASBJ Guidance No. 31, “ Implementation

presentation, the Consolidated Statement of Income for the previous fiscal year

Guidance on Accounting Standard for Fair Value Measurement, ” and revised

has been reclassified.

related ASBJ Statements and ASBJ Guidance (the “New Accounting Standards”).

As a result, in the “Other income (expenses)” section, 817 million yen that wasUnder the New Accounting Standards, nonmarketable available-for-sale equity

presented as “Loss on disaster” and 120million yen that was presented as “Other-securities are stated at cost, while under the current accounting standards,

net” in the Consolidated Statement of Income for the previous fiscal year is now

nonmarketable available-for-sale securities are stated at cost.

presented as 697 million yen of “Other-net.”

The Company expects to apply the accounting standard and guidance for annual

x. Additional Information

periods beginning on March 1, 2022, and is in the process of measuring the(Accounting estimates relating to the impact of the COVID-19 pandemic)

effects of applying the accounting standard and guidance in future applicable

The COVID-19 pandemic has brought about changes in the Group in terms

periods.

sales trends for some products as well as customer visits to stores. Based on
the actual performance data pertaining to store sales and others after March thatw. Changes in Presentation of Financial Statements

was available at the time of preparation of the financial statements, the Group(Changes resulting from application of “ Partial Amendments to Accounting

has determined that the above changes will not have a significant impact onStandard for Tax Effect Accounting”)

accounting estimates such as impairment accounting for non-current assets for

The Company has applied the “Partial Amendments to Accounting Standard forthe end of the 2020 fiscal year.

Tax Effect Accounting” (ASBJ Statement No. 28; February 16, 2018) from the
beginning of the fiscal year ended February 29, 2020. Consequently, “Deferred
tax assets” are presented under “Investments and other assets” and “Deferred tax
liabilities” are presented under “Long-term liabilities.”
As a result, 4,395 million yen that was presented as “Deferred tax assets” under“Current assets” and 160 million yen that was presented as “Deferred tax liabilities”

under “Long-term liabilities” in the Consolidated Balance Sheet for the previous
fiscal year are now presented as 30,995 million yen of “Deferred tax assets” underLawson, Inc. MD&A 202032

3 ACCOUNTS RECEIVABLE ― DUE FROM FRANCHISED STORES

4 LEASES

Under the franchise agreements, the Company is responsible for providing

As lessee:architectural and design services with respect to the franchised storesʼ facilities, forFinance lease transactions that do not transfer ownership.

training of the franchiseesʼ personnel, and for the centralized processing of invoices(1) Components of leased assets

from suggested vendors of merchandise and subsequent payments of amounts
payable to such vendors.

The Companies lease certain store facilities and other assets.
(2) Accounting method for depreciation of leased assets
The accounting method for depreciation of leased assets is as described in “2.

The EDP system of the Company generates a record of merchandise purchased by

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (j) Property and Store

each franchised store and accumulates the amounts payable to respective vendors.

Equipment.”

Under the franchise agreements, the Company, as a representative for all franchised
stores, pays amounts payable to the vendors on the storesʼ behalf. When the

As lessor:

merchandise is received by each franchised store, the Company records the cost of

Lease receivables as of February 29, 2020 and February 28, 2019, are summarized

the merchandise in the “Accounts receivable ̶ Due from franchised stores” accountas follows:since such costs shall be subsequently recovered from the respective franchised

Thousands of
U.S. Dollars

Millions of Yen

stores.

2020

The “Accounts receivable ̶ Due from franchised stores” account represents net

Lease fee receivableamounts recoverable from the franchised stores.

Interest income equivalents
Lease receivables

2020

2019

¥18,349¥19,608$167,678

(472)

(488)

(4,313)¥17,877¥19,120$163,365

Maturities of lease receivables for finance leases deemed to transfer leased property to
the lessee at February 29, 2020 are as follows:Year Ending
February 28 or 29

2021¥2,575$23,531

2022

2,240

20,470

2023

2,168

19,812

2024

1,868

17,070

2025

1,581

14,4472026 and thereafter

7,917

72,348¥18,349

167,687

Total

33

Lawson, Inc. MD&A 2020

Thousands of
U.S. Dollars

Millions of Yen

Financial Section

The proceeds, realized gains, and realized losses on the available-for-sale securities

5 MARKETABLE AND INVESTMENT SECURITIES

which were sold during the years ended February 29, 2020 and February 28, 2019,Marketable and investment securities as of February 29, 2020 and February 28, 2019were as follows:

consisted of the following:

Millions of Yen
Millions of Yen

2020
Non-current
̶Marketable and other equity securities

Total

February 29, 2020

2020

Available-for-sale:
Equity securities2019¥9,880Non-current̶Corporate bonds

Thousands of
U.S. Dollars

Realized
Gains

Proceeds¥319

Realized
Losses¥165¥106$90,286¥13,342

68

207

621

¥9,948¥13,549$90,907

Millions of Yen
February 28, 2019

The costs and aggregate fair values of marketable and investment securities as ofFebruary 29, 2020 and February 28, 2019, were as follows:

Available-for-sale:
Equity securities

Realized
Gains

Proceeds¥7,156

Realized
Losses¥738

Millions of Yen
February 29, 2020

Securities classified as available-for-sale̶Equity securities

Cost

Unrealized
Gains

Unrealized
LossesFair
Value

Thousands of U.S. Dollars
February 29, 2020

¥6,719¥1,648¥27¥8,340Available-for-sale:
Equity securities

Proceeds$2,915

Realized
Gains$1,508Realized
Losses$969

Millions of Yen
February 28, 2019

Securities classified as available-for-sale̶Equity securities

Cost¥6,796

Unrealized
Gains

Unrealized
Losses¥4,383

¥17

Fair
Value
¥11,162

Thousands of U.S. Dollars
February 29, 2020

Cost

Securities classified as available-for-sale̶Equity securities$61,400

Unrealized
Gains

Unrealized
Losses$15,060

$247

Fair
Value
$76,213

Lawson, Inc. MD&A 202034

6 LONG-LIVED ASSETS

The above noted assets which incurred impairment losses for the years ended

The Companies mainly identify individual stores as the smallest cash generating

February 29, 2020 and February 28, 2019, consisted of the following:

units. The Companies recognize an impairment loss in cases where the value of longcarrying amounts of those assets are written down to the recoverable amounts and2020

an impairment loss is recorded in other expenses in the consolidated statement of

Buildings

income.

Furniture, fixtures, and equipment
Lease assets

2020

2019

¥10,774¥7,981$98,456

709

587

6,479

6,104

4,693

55,780

The Companies recognized an impairment loss in the following asset categories for the

Land

117

51

1,069

years ended February 29, 2020 and February 28, 2019:

Software

948

503

8,663

Other

70

76

640

Total

¥18,722¥13,892$171,087

Thousands of U.S.
Dollars

Millions of Yen

2020

2020

2019

Goodwill

1

Category

Related Assets

Location

StoresBuildings andFurniture, fixtures,and equipment

Tokyo¥2,533¥1,591$23,147

Osaka

1,689

1,505

15,435

The recoverable amount of these assets was measured based on net selling price

Others13,435

10,241

122,773

or value in use. The net selling price of land was calculated based on the appraised

Land

117

51

1,069

value by a real estate appraiser or the expected contract price. The value in use wasSoftware

948

503

8,663

calculated by discounting estimated future cash flows. The discount rates used were

Other

Goodwill
Total

35

Thousands of
U.S. Dollars

Millions of Yen

lived assets has declined, primarily as a result of continuous operating losses. The

Lawson, Inc. MD&A 2020

1
¥18,722¥13,892

mainly 3.8% and 3.6% for the years ended February 29, 2020 and February 28, 2019,$171,087

respectively.

Financial Section

9 ACCOUNTS PAYABLE̶DUE TO FRANCHISED STORES

7 LAND REVALUATION
Under the “Law of Land Revaluation,” promulgated on March 31, 1998, and revised on

The cost of merchandise supplied to franchised stores is recorded as “Accounts

March 31, 1999 and 2001, the Company opted for a one-time revaluation of its own-use

receivable̶Due from franchised stores” as described in Note 3.

land to a value based on real estate appraisal information as of February 28, 2002.
All franchised stores make remittances of cash proceeds from daily sales to the
The resulting land revaluation difference represents unrealized depreciation of land andCompany. In certain instances, the remittance from a franchised store exceeds theis stated, net of income taxes, as a component of equity. There was no effect on thebalance of “Accounts receivable̶Due from franchised stores.” In the accompanying

consolidated statement of income. Continuous readjustment is not permitted unless theconsolidated balance sheet, such excess balances are presented as “Accounts

land value subsequently declines significantly.

payable̶Due to franchised stores.”

As at February 29, 2020, the carrying amount of the land after the above one-timerevaluation exceeded the market value by ¥81 million ($740 thousand).

8 ACCOUNTS PAYABLE―TRADE
The balances of “ Accounts payable ̶ trade ” represent the amounts payable tovendors for merchandise purchased by the Company-operated stores and franchised
stores. The Company centralizes all merchandise purchasing procedures both for theCompany-operated stores and franchised stores and makes collective payments tovendors (see Note 3).
“Accounts payable̶trade” as of February 29, 2020 and February 28, 2019, weresummarized below:
Thousands of
U.S. Dollars

Millions of Yen

2020
Accounts payable̶trade for franchised stores
Accounts payable̶trade for the Company-operated stores
Total

2019

2020

¥108,546¥104,274$991,922

20,852

19,135

190,551¥129,398¥123,409$1,182,473

Lawson, Inc. MD&A 202036

10 SHORT-TERM LOANS AND LONG TERM DEBT

The aggregate annual maturities of finance lease obligations at February 29, 2020,

Short-term loans February 29, 2020 and February 28, 2019, consisted of notes towere as follows:banks.
Year Ending February 28 or 29

Thousands of
U.S. Dollars

Millions of Yen

The annual interest rates applicable to the short-term loans were 0.08% and 0.12% at

2021¥45,945$419,857

February 29, 2020 and February 28, 2019, respectively.

2022

37,962346,9172023

35,621

325,5232024

27,178248,360

Long-term debt at February 29, 2020 and February 28, 2019, consisted of thefollowing:

Total

2020

40,602371,032¥183,710$1,711,688

Thousands of
U.S. Dollars

Millions of Yen

2019

2020

Lease obligations are presented on a net basis by offsetting with long-term loans
receivable as the arrangement meets the offsetting requirements.The amounts offset

Loans from banks and financial company,
due serially to 2024 with a weighted-averageinterest rate of 0.21% (2020)¥310,000¥310,000$2,832,861

Obligations under finance leases

187,311

170,192

1,711,697

Less current portion(45,945)(88,750)(419,857)¥451,366¥391,441$4,124,751

Long-term debt, less current portion

2025 and thereafter

for the lease obligations due within one year and those due over one year are ¥335
million ($3,061 thousand) and ¥4,699 million ($42,941 thousand), respectively.
The Company and certain consolidated subsidiaries have entered into loan commitment
agreements to efficiently finance working capital.
The balances of unused loans at February 29, 2020 and February 28, 2019, consisted

The aggregate annual maturities of long-term debt, excluding finance leases, atof the following:

February 29, 2020, were as follows:Year Ending February 28 or 29

Millions of Yen

2021¥180,000$1,644,887

2023

20,000182,7652024

80,000731,0612025 and thereafter
Total

37

Total loan commitments

2022

Lawson, Inc. MD&A 2020

30,000274,148¥310,000$2,832,861

Thousands of
U.S. Dollars

Millions of Yen

Thousands of
U.S. Dollars

Outstanding balance of used loans
Net amount

2020

2019

2020

¥220,000¥220,000$2,010,418

3,000

79,80027,415¥217,000¥140,200$1,983,003

Financial Section

11 EMPLOYEES RETIREMENT BENEFITS(2) Changes in plan assets for the year ended February 29, 2020, 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¥5,582$51,010(3)(28)¥5,579$50,982

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 29, 2020
(1) Changes in defined benefit obligations for the year ended February 29, 2020, wereas follows:

Balance at beginning of year
Current service cost

Millions of Yen

Thousands of
U.S. Dollars¥20,316$183,653

1,881

17,189Interest cost

64

585

Actuarial losses

332

3,034

Benefits paid

(1,191)(10,884)

OthersBalance at end of year7

64

¥21,409$195,641

Millions of Yen

Thousands of
U.S. Dollars¥19,418$177,446(5,579)(50,982)

13,839126,464

Unfunded defined benefit obligation

1,991

18,194

Net liability arising from defined benefit
obligations¥15,830$144,658

Millions of Yen

Thousands of
U.S. Dollars

Liability for retirement benefits¥15,830$144,658

Net liability arising from defined benefit
obligations¥15,830$144,658

Lawson, Inc. MD&A 202038

(4) Components of net periodic benefit costs for the year ended February 29, 2020,
were as follows:a. Components of plan assets
Millions of Yen

Thousands of
U.S. Dollars

Service cost

¥1,881$17,189

Interest cost

64

585

Recognized actuarial losses

177

1,617

5

46

(17)

(155)

¥2,110$19,282

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 29, 2020, were set forth as follows:

respect to defined retirement benefit plans for the year ended February 29, 2020,

Discount rate

were as follows:

Expected rate of return on plan assets
Millions of Yen

Thousands of
U.S. Dollars

Actuarial losses¥(157)$(1,435)

Total¥(157)$(1,435)

0.3% (mainly)
0%(9) Contributions to the defined contribution pension plan for the year ended February
29, 2020, were as follows:
Millions of Yen(6) Amounts recognized in accumulated other comprehensive income (before income
tax effect) in respect to defined retirement benefit plans as of February 29, 2020,
were as follows:
Millions of Yen

Thousands of
U.S. Dollars

Unrecognized actuarial losses¥1,346$12,300

Total¥1,346$12,300

Unrecognized prior service cost

39

Lawson, Inc. MD&A 2020

Net periodic benefit cost

¥564

Thousands of
U.S. Dollars$5,154

Financial Section

Year Ended February 28, 2019

Millions of Yen(1) Changes in defined benefit obligations for the year ended February 28, 2019, were

Liability for retirement benefits¥14,733

Net liability arising from defined benefit obligations¥14,733

as follows:
Millions of Yen

Balance at beginning of year
Current service cost
Interest cost

¥19,0911,820(4) Components of net periodic benefit costs for the year ended February 28, 2019,were as follows:

64

Millions of Yen

Actuarial losses

357

Service cost

Benefits paid

(1,015)Interest cost

64

Recognized actuarial losses

185

OthersBalance at end of year(1)
¥20,316

Amortization of prior service cost
Others(2) Changes in plan assets for the year ended February 28, 2019, were as follows:

Net periodic benefit costs¥1,8201(31)¥2,039Millions of Yen

Balance at beginning of year
Actuarial gains
Balance at end of year

¥5,587(5) Amounts recognized in other comprehensive income (before income tax effect) in(5)

respect to defined retirement benefit plans for the year ended February 28, 2019,¥5,582were as follows:
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:
Millions of Yen

Funded defined benefit obligation
Plan assets

Prior service cost

¥1

Actuarial losses

(178)

Total

¥(177)¥18,493(5,582)
12,910Unfunded defined benefit obligation
Net liability arising from defined benefit obligations

1,823¥14,733

Lawson, Inc. MD&A 202040

(6) Amounts recognized in accumulated other comprehensive income (before income

12 ASSET RETIREMENT OBLIGATIONS

tax effect) in respect to defined retirement benefit plans as of February 28, 2019,

The changes in asset retirement obligations for the years ended February 29, 2020

were as follows:

and February 28, 2019, were as follows:
Millions of Yen

Thousands of
U.S. Dollars

Millions of Yen

Unrecognized prior service cost
Unrecognized actuarial losses¥1,190Total¥1,1902020
Balance at beginning of year
Additional provisions associated with theacquisition of property, plant,
and equipment(7) Plan assets
a. Components of plan assets

Reconciliation associated withpassage of time

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

Reduction associated with settlementof asset retirement obligations
Additional provisions associated withchanges in accounting estimates
Total

The expected rate of return on plan assets is determined considering the long-Less current portion

term rates of return which are expected currently and in the future from theAsset retirement obligations,less current portion

various components of the plan assets.

2020

2019

¥31,118¥29,109$284,364

1,414

2,385

12,922

384

396

3,509

(1,525)(772)(13,936)

35,342

31,118322,964

(6)

(16)

(55)

¥35,336¥31,102$322,910

3,950

36,096(8) Assumptions used for the year ended February 28, 2019, were set forth as follows:

Changes in accounting estimates were recorded as it became evident that the estimate

Discount rateof the discounted cash flows required for future asset retirement would change, due

Expected rate of return on plan assets

0.5% (mainly)0%

to certain events. A reconciliation has been prepared for the change, which resulted in
an increase of the asset retirement obligation for the year ended February 29, 2020, by(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

41

Lawson, Inc. MD&A 2020

¥526

¥3,950 million ($36,096 thousand).

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 202042

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 29, 2020, 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

20th Stock Option

8 director
10 executive
officers

17,800 shares2019.6.7¥1($0.01)

From June 7, 2019 to May 20, 2039

Stock Option

43

Lawson, Inc. MD&A 2020

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
Option16th Stock
Option

500

2,700

3,100

4,500

1,000

1,000

5,300

500

1,000

4,200

5,300

500

500

2,300

2,700

3,900

500

500

500

500

400

400

600

500

500

4,800

500

1,000

3,700

4,800

500

400

400

600

500

500

4,800

500

1,000

3,700

4,800

4,800

Year Ended February 28, 2019Non-vested
February 28, 2018̶Outstanding
GrantedCanceled
VestedFebruary 28, 2019̶Outstanding
VestedFebruary 28, 2018̶Outstanding
VestedExercised
Canceled
February 28, 2019̶Outstanding
Year Ended February 29, 2020
Non-vested
February 28, 2019̶Outstanding
GrantedCanceled
VestedFebruary 29, 2020̶Outstanding
VestedFebruary 28, 2019̶Outstanding
VestedExercised
Canceled
February 29, 2020̶Outstanding
Exercise price

4,300
500

400

400

600

500

500

500

500

1,000

3,700

¥1

¥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)($0.01)

Average stock price at exercise¥5,040($46.06)

Fair value price at grant date

¥3,178¥2,852¥3,477¥2,652¥2,689¥3,339¥5,516¥5,146¥6,251¥6,254($29.04)($26.06)($31.77)($24.24)($24.57)($30.51)($50.41)($47.03)($57.12)($57.15)

Lawson, Inc. MD&A 2020

44

Stock option activity is as follows:

The assumptions used to measure the fair value of the 20th stock options were as

17th Stock
Option18th Stock
Option20th Stock
Option14,70014,700

8,700

4,700

500

1,300

300

8,200

3,400

14,400Lawson, Inc. MD&A 2020

Volatility of stock price21.16%

Estimated remaining outstanding period

10 years

Estimated dividend¥255.0 per share

Risk-free interest rate

(0.12%)

15 INCOME TAXESThe Company and its domestic subsidiaries are subject to a number of different taxes
approximately 30.6% and 30.9% for the years ended February 29, 2020 and February
17,80017,80028, 2019.
The tax effects of significant temporary differences and tax loss carryforwards, which
resulted in deferred tax assets and liabilities at February 29, 2020 and February 28,
2019, are as follows:

8,200

3,400

14,40017,800

8,200

3,400

14,400¥1¥1¥117,800¥1($0.01)($0.01)($0.01)($0.01)

Average stock price at exercise

45Black-Scholes option
pricing model

based on income, which in the aggregate, resulted in a normal statutory tax rate of

GrantedCanceled
VestedFebruary 29, 2020̶Outstanding

Fair value price at grant date

Estimate method

14,700February 28, 2019̶Outstanding

VestedFebruary 28, 2019̶Outstanding
VestedExercised
Canceled
February 29, 2020̶Outstanding
Exercise pricefollows:
20th Stock Option

Year Ended February 28, 2019Non-vested
February 28, 2018̶Outstanding
GrantedCanceled
VestedFebruary 28, 2019̶Outstanding
VestedFebruary 28, 2018̶Outstanding
VestedExercised
Canceled
February 28, 2019̶Outstanding
Year Ended February 29, 2020
Non-vested

19th Stock
Option¥5,343¥5,363¥4,833¥3,047($48.83)($49.01)($44.17)($27.84)

Financial Section

Thousands of
U.S. Dollars

Millions of Yen

2020

2020

2019

A reconciliation between the normal effective statutory tax rates and the actual effective
tax rates reflected in the accompanying consolidated statements of income for theyears ended February 29, 2020 and February 28, 2019, is as follows:

Deferred tax assets:
Accrued enterprise taxes¥959¥1,114$8,764

Accrued employeesʼ bonuses

1,514

1,343

13,835

Excess of depreciation

9,427

9,724

86,146

616

529

5,629

Employeesʼ retirement benefits

6,772

6,400

61,884

Allowance for doubtful accounts

198

283

1,809

Excess of amortization of software

2020

2019

Normal effective statutory tax rate

30.6 %

30.9 %

Change in valuation allowance

(5.1)

(2.5)

Non-deductible permanent differencessuch as entertainment expenses

0.6

0.5

Non-taxable permanent differencessuch as dividend income

(0.0)

(2.3)

Impairment losses

12,741

10,466

116,431

Per-capita inhabitant tax

1.3

1.0

Tax loss carryforwards

6,381

7,984

58,311

Other

5,907

6,221

53,980Difference in tax rates of foreign
consolidated subsidiaries

2.2

1.5

Total of tax loss carryforwards andtemporary differences

44,51544,063406,790

Reduction of ending deferred tax balance
due to change in statutory tax rate

0.5

0.4

Amortization of goodwill

3.9

3.0

Less valuation allowancefor tax loss carryforwards(5,101)(46,614)

Other-net

(0.2)

3.4

Actual effective tax rate

33.8 %

35.9 %

Less valuation allowancefor temporary differences(2,878)

Total valuation allowance(7,980)(10,759)(72,923)

The expiration of tax loss carryforwards, the related valuation allowances and the36,53533,305

333,866

resulting net deferred tax assets as of February 29, 2020 , were as follows:

Trademark rights

2,679

2,861

24,481

Net deferred tax assets¥33,856¥30,444$309,385

Total(26,300)

Deferred tax liabilities:

Millions of Yen

The amount of valuation reserves decreased by ¥2,779 million ($25,395 thousand).
This primarily reflects a decrease in valuation reserves relating to tax loss carriedforward at the consolidated subsidiary.

February 29, 2020

Due in1 Yearor Less

Due after
1 Yearthrough
2 Years

Due after
2 Years
through
3 Years

Due after
3 Years
through
4 Years

Due after
4 Years
through
5 Years

Due after
5 Years

Total

Deferred tax assets
relating to tax loss
carryforwards¥655¥1,939¥729¥1,129¥1,131¥798¥6,381Less valuation
allowances for tax
loss carryforwards

(655)

(777)

(729)

(1,129)(1,131)(680)(5,101)

117

1,280

Net deferred tax
assets relating to
tax loss carryforwards

1,163

Lawson, Inc. MD&A 202046

17 OTHER COMPREHENSIVE INCOME

Thousands of U.S. Dollars

February 29, 2020

Due in1 Yearor Less

Due after
1 Yearthrough
2 Years

Due after
2 Years
through
3 Years

Due after
3 Years
through
4 Years

Due after
4 Years
through
5 Years

The components of other comprehensive income for the years ended February 29,
Due after
5 Years

2020 and February 28, 2019, were as follows:
Total

Deferred tax assets
relating to tax loss
carryforwards$5,986$17,719$6,662$10,317$10,335$7,292$58,311

Less valuation
allowances for tax
loss carryforwards(5,986)(7,100)(6,662)(10,317)(10,335)(6,214)(46,614)2020

10,628

1,069

11,697We believe the tax loss carried forward to be recoverable since taxable income isexpected in and after the next consolidated fiscal year.

(1) Finance lease assets and finance lease obligations regarded as non-cash
transactions incurred for the year ended February 29, 2020, amounted to ¥50,007
million ($456,977 thousand).
(2) Asset retirement obligations regarded as non-cash transactions incurred for theyear ended February 29, 2020, amounted to ¥5,363 million ($49,008 thousand).
IFRS16, “Leases,” has been applied to foreign consolidated subsidiaries since FY2020,
as described in “Changes in Accounting Policies. ” Accordingly, lease transactions
entered into by such subsidiaries are included in the amounts of assets and liabilities
relating to the above finance lease transactions.

Lawson, Inc. MD&A 2020¥(2,510)¥2,474$(22,937)

Reclassification adjustments to loss

(121)

(676)

(1,106)

Amount before income tax effect(2,631)

1,798(24,043)

779

(533)

7,119

¥(1,852)¥1,265$(16,924)

Income tax effectTotal
Foreign currency translation adjustments
Adjustments arising during the year
Total

16 SUPPLEMENTAL CASH FLOW INFORMATION

2020

2019

Unrealized gain on available-for-sale securities
Gains (losses) arising during the year

Net deferred tax
assets relating to
tax loss carryforwards

47

Thousands of
U.S. Dollars

Millions of Yen

(543)

(674)

(4,962)¥(543)¥(674)$(4,962)¥(335)¥(177)$(3,061)

Remeasurements of defined benefit plans
Losses arising during the year
Reclassification adjustments to profit
Amount before income tax effect
Income tax effectTotal
Total other comprehensive income

178

202

1,626

(157)

25

(1,435)

70

(6)

640

¥(87)

¥19

$(795)¥(2,482)¥610$(22,681)

Financial Section

18 SEGMENT INFORMATION

Lawson Urbanworks, Inc. undertakes company-owned LAWSON stores mainly

In March 2008, the ASBJ revised ASBJ Statement No.17, “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.

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
and is subject to regular review by the Board of Directors with regard to theallocation of managerial resources and performance evaluation.

(b) Methods of measurement for the amounts of sales, profit , assets, and other items
for each reportable segment

The Group operates primary businesses Domestic Convenience Store Business,
Seijo Ishii Business, Entertainment-related Business and Financial Services Business

The segment accounting policies are the same as those described in “Accounting

while incorporating other related businesses.

Policies for the Preparation of Consolidated Financial Statements.” Segment profit
is based on operating income. Intersegment sales or transfers are based on market

Therefore, the Group has made the Domestic Convenience Store Business, Seijo

values.

Ishii Business, Entertainment-related Business and Financial Services Business units
its main reportable segments, based on consideration of financial characteristics
and the nature of the services provided.
Regarding the Domestic Convenience Store Business, Lawson, Inc. operates afranchise 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 202048

(c) Information about sales, profit (loss), assets, and other items is as follows:
Millions of Yen

2020
Reportable Segments
Domestic
Convenience
Store Business

Seijo Ishii
Business

Entertainment-Related
Business

Financial
Services
Business

Other

Total

¥465,333¥93,120¥83,961¥31,646¥56,177¥730,237

1,386

2,443

1,098

11,146¥(11,146)¥(11,146)

Reconciliations

Consolidated

Sales:
Sales to external customers
Intersegment sales or transfers

6,219¥730,237

Total¥471,552¥93,120¥85,347¥34,089¥57,275¥741,383

Segment profit (loss)¥47,122¥8,348¥5,313¥3,089¥(929)¥62,943

Segment assets

908,974

71,90369,737395,854

42,4981,488,966

Depreciation

57,755

1,888

2,365

6,401

6,334

74,74374,743

Amortization of goodwill

2,444

1,437

502

57

4,440

4,440

Investments in associated companies

5,100

5,100

5,100

Increase in property, plant, and equipment and intangible assets

33,16544,78344,783¥730,237¥62,943¥(131,233)

1,357,733

Other:

1,045

2,772

2,587

5,214

Millions of Yen

2019
Reportable Segments
Domestic
Convenience
Store Business

Seijo Ishii
Business

EntertainmentRelated
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¥(99,660)

1,342,330

Other:

49

Lawson, Inc. MD&A 2020

688

1,332

8,494

3,724

Financial Section

Thousands of U.S. Dollars

2020
Reportable Segments
Domestic
Convenience
Store Business

Seijo Ishii
Business

Entertainment
relatedBusiness

Financial
Services
Business

Other$289,189$513,361

Total

Reconciliations

Consolidated

Sales:
Sales to external customers$850,955$767,257
12,66622,325

10,033

101,855$(101,855)$4,309,166$850,955$779,923$311,514$523,394$6,774,952$(101,855)

Segment profit (loss)$430,613$76,286$48,552$28,228$(8,489)$575,190

Segment assets

8,306,442

657,068

637,275

3,617,418

388,358

13,606,561

Depreciation

527,780

17,253

21,61258,49457,882683,021683,021

Amortization of goodwill

22,334

13,132

4,587

521

40,57440,57446,60546,605

9,549

25,33147,648409,239409,239

Intersegment sales or transfers
Total$4,252,335
56,831$6,673,097$6,673,097$6,673,097$575,189$(1,199,242)

12,407,320

Other:

Investments in associated companies

46,605

Increase in property, plant, and equipment and intangible assets

303,070

23,641

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 202050

(d) Information regarding loss on impairment of long-lived assets of reportable segments
Millions of Yen

2020
Reportable Segments
Domestic
Convenience
Store Business

Loss on impairment of long-lived assets¥18,359

Seijo Ishii
Business

EntertainmentRelated
Business¥17

Financial
Services
Business

Other

¥73

¥273

Total

Reconciliations¥18,722

Consolidated¥18,722

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

Thousands of U.S. Dollars

2020
Reportable Segments
Domestic
Convenience
Store Business

Loss on impairment of long-lived assets

51

Lawson, Inc. MD&A 2020

$167,769

Seijo Ishii
Business$155

EntertainmentRelated
Business$667

Financial
Services
Business

Other$2,496

Total$171,087

Reconciliations

Consolidated$171,087

Financial Section(e) Information regarding the carrying amount of goodwill by reportable segments
Millions of Yen

2020
Reportable Segments

Goodwill at February 29, 2020

Domestic
Convenience
Store Business

Seijo Ishii
Business¥13,654¥20,958

EntertainmentRelated
Business

Financial
Services
BusinessOther¥7,185

¥584

Total

Reconciliations¥42,382

Consolidated¥42,382

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

Thousands of U.S. Dollars

2020
Reportable Segments

Goodwill at February 29, 2020

Domestic
Convenience
Store Business

Seijo Ishii
Business

EntertainmentRelated
Business$124,774$191,520$65,658

Financial
Services
Business

Other$5,337

Total$387,298

Reconciliations

Consolidated$387,298

The amount under “Other” is attributable to the overseas business.

Lawson, Inc. MD&A 202052

19 RELATED PARTY TRANSACTIONS(2) Transactions between subsidiaries and related parties

Balances and transactions of the Company with a subsidiary of Mitsubishi Corporation

Thousands of
U.S. Dollars

Millions of Yen

as of and for the years ended February 29, 2020 and February 28, 2019, were as

2020

2019

2020

¥130,000¥200,000$1,187,974

Payment of guarantee fees

16

8

146

Accrued expenses

2

follows:
Mitsubishi Corporation
Acceptance of debt guarantees(1) Transactions between the Company and related parties
Thousands of
U.S. Dollars

Millions of Yen

2020

2020

2019

Mitsubishi Corporation
Acceptance of debt guarantees¥3,000¥9,800$27,415000Accounts payable̶trade¥61,836¥59,898$565,074

Purchases

773,366

754,005

7,067,221

Payment of guarantee fees
Mitsubishi Shokuhin Co., Ltd.

Mitsubishi Corporation Financial &Management Services (Japan) Ltd.
Short-term loans payable
Accrued interest¥3,000¥9,800$27,41511

9Purchase prices and other conditions are determined on an armʼs-length basis.

53

Lawson, Inc. MD&A 2020

18

Mitsubishi Corporation Financial &Management Services (Japan) Ltd.
Short-term loans payable¥70,000

Accrued interest
Long-term loans payable

29¥130,000¥130,000$1,187,974

62

79

567

Accounts receivable ― Other¥28,872¥29,243$263,840

Sales of processed food, etc.

331,938

184,481

3,033,336

Accrued interest
Mitsubishi Shokuhin Co., Ltd.:Sales prices and other conditions are determined on an armʼs-length basis.

Financial Section

20 FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES

of managing a banking business and funding 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) and(3) Fair Values of Financial Instruments

lease deposits are exposed to credit risks of borrowers and landlords. With regard

Fair values of financial instruments are based on quoted prices in active markets. If

to this risk, the Company manages credit on a daily basis at the relevant divisiona quoted price is not available, other rational valuation techniques are used instead.

and aims to identify and minimize collection concerns in the early stages arising

Since multiple factors are considered in the estimation of fair value, the results offrom the deterioration in the financial condition of those borrowers and landlords.

the estimation might differ if other valuation techniques were used.
Millions of Yen

Investment securities are primarily shares of companies with which the Company

Carrying
AmountFair Value

Unrealized
Gain/Losshas business relationships and listed shares which are exposed to the risk of market

February 29, 2020

price fluctuation. With regard to this risk, the Company monitors the financial

Due from franchised storesconditions of business counterparties on a regular basis.

Lease receivables

17,877

17,598

Accounts receivable

159,097

159,097

Long-term loans receivable

47,461

46,608(853)

Investment securities

9,496

9,214

(283)

For trade payables, most of the accounts payable-trade, accounts payable due tofranchised stores, accounts payable-other, and deposits received as a result of billsettlement services have payment due dates within one month, while most deposits
received held as a result of ticket 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 purpose¥47,367¥47,367¥(279)

Lease deposits

106,778

108,386

1,608

Total

¥388,077¥388,269

193

Accounts payable¥224,246¥224,246

Short-term loans

39,85039,850

Deposits received

193,097

193,097

Long-term debt(including current portion of long-term debt)

497,311492,060¥(5,251)

Total¥954,503¥949,253¥(5,251)

Lawson, Inc. MD&A 202054

As long-term loans receivable and lease obligations satisfy the offsetting requirements,

Millions of Yen
February 28, 2019
Due from franchised stores

Carrying
Amount¥47,180

Fair Value

Unrealized
Gain/Losslong-term loans receivable are offset against lease obligations and the net amount isshown in the consolidated balance sheets. The offset amount is 5,034 million yen.

¥47,180

Lease receivables

19,12018,322

Accounts receivable

120,852

120,852¥(798)

Long-term loans receivable

43,96543,903

Investment securities

11,162

11,162

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)

Due from franchised stores and accounts receivables
The carrying values of Due from franchised stores and accounts receivable (including(62)

allowance for doubtful accounts) approximate fair value because of their shortmaturities.
Lease receivables
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

Thousands of U.S. Dollars

55

February 29, 2020

Carrying
AmountDue from franchised stores$432,852$432,852

Lease receivables

163,365

160,815

Accounts receivable

1,453,870

1,453,870

Long-term loans receivable

433,711425,916(7,795)Investment securities

86,777

84,191(2,586)

Lease deposits

975,765

990,460

14,694

Total$3,546,340$3,548,104$( 1,764)

Accounts payable$2,049,218$2,049,219

Short-term loans

364,160

364,160

Deposits received

1,764,561

1,764,571

Long-term debt(including current portion of long-term debt)

4,544,558

4,496,573$(47,985)

Total$8,722,498$8,674,523$(47,985)

Lawson, Inc. MD&A 2020

Fair Value

Unrealized
Gain/Loss$(2,549)

the Companiesʼ assumed corporate discount rate.
Investment securities
The fair values of investment securities are measured at the quoted market price on
the stock exchange for the equity instruments, and at the quoted price obtained 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.

Financial Section

Accounts payable and deposits received(5) Maturity Analysis for Financial Assets and Securities with Contractual Maturities

The carrying values of accounts payable and deposits received approximate fair value

Millions of Yen

because of their short maturities.

2020
Due in1 Yearor Less

Short-term loans
These instruments are stated at their carrying values. Because they are determinedusing floating interest rates that reflect market rates in a short-time and have short

Due from franchised storesmaturities, their carrying values are approximately the same as their fair values.

Lease receivables

2,463

Accounts receivable

159,122Long-term debt (including current portion of long-term debt)

Long-term loans receivable

The fair values of long-term debt are determined by discounting the cash flows related

Lease deposits

to the debt at the Companiesʼ assumed corporate discount rate.

Total

Due after
1 Year through5 Years

356¥7,549¥7,86417,753

15,481

8,679

24,837

26,74346,935¥50,139¥50,088¥60,867

Millions of Yen

2019
Thousands of
U.S. Dollars

Investments in equity instrumentsthat do not have a quoted market
price in an active market

2019¥13,932¥217,987

Carrying Amount2020

Due after
10 Years¥47,367(4) Financial Instruments Whose Fair Value Cannot Be Reliably Determined

Millions of Yen

Due after
5 Years
through
10 Years

Due in1 Yearor Less2020
Due from franchised stores

¥309

¥359

$2,824

Investments in unconsolidated
subsidiaries and affiliated companies

19,362

18,298

179,935

Others

1,299

1,441

11,8702,553

Accounts receivable

120,970

Lease deposits
Total

Due after
5 Years
through
10 Years

Due after
10 Years¥47,180

Lease receivables
Long-term loans receivable

Due after
1 Yearthrough
5 Years¥7,940¥8,628744

15,986

17,035¥10,259

8,519

24,74725,96147,808¥179,966¥48,672¥51,623¥58,067

Lawson, Inc. MD&A 202056

Thousands of U.S. Dollars

2020
Due in1 Yearor LessDue from franchised stores$432,852

Lease receivables$22,508

Accounts receivable

1,454,098

Due after
1 Yearthrough
5 Years

Due after
5 Years
through
10 Years

Due after
10 Years$68,985$71,863

Long-term loans receivable

3,253

162,231

141,469

127,314

Lease deposits

79,311

226,958

244,385

428,905$1,992,022$458,174$457,717$556,219

Total

Year Ended February 28, 2019

Basic EPS̶Net income available
to common shareholders

Millionsof YenThousandsof Shares

Yen

Net
IncomeWeightedAverage
Shares

EPS¥25,586

100,057¥25,586

100,104

Effect of dilutive securities̶Stock options
Diluted EPS̶Net income for computation¥255.7147¥255.59

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

shareholdersʼ meeting held on May 27, 2020:(“EPS”) for the years ended February 29, 2020 and February 28, 2019, is as follows:Year Ended February 29, 2020

Basic EPS̶Net income available
to common shareholders

Millionsof YenThousandsof Shares

Net
IncomeWeightedAverage
Shares¥20,108

100,061¥20,108

100,119

Effect of dilutive securities̶Stock options
Diluted EPS̶Net income for computation

57

Lawson, Inc. MD&A 2020

Thousands of
U.S. Dollars

Millions of Yen
Yen

U.S. Dollars

EPS¥200.95$1.84¥200.84$1.84

58

Cash dividends, ¥75.0 ($0.69) per share¥7,505$68,583Independent Auditor’s Report

Lawson, Inc. MD&A 202058

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

http://lawson.jp/en/
Published September 2020©1975-2020 Lawson, Inc. All rights reserved.
Printed in Japan