Summary of Results for FY2014

Lawson, Inc.
April 10, 2015

Copyright (c) 2015 Lawson, Inc. All rights reserved.

1

Leverage Lawson’s unique strengths to
respond effectively to social changes

Genichi Tamatsuka
President and CEO, Representative Director
Lawson, Inc.
Copyright (c) 2015 Lawson, Inc. All rights reserved.

2

Fiscal 2014 Review
Convenience store business in Japan : Tough competition, polarized consumption,

falling customer numbers
Group management : Seijo Ishii acquisition, Lawson Store 100 restructuring
Expand potential revenue streams

Small-sizeneighborhood stores

Seijo Ishii
acquisition

顧客接点創造LawsonStore 100
restructuring●Offer all basic CVS services●Increase range of expected basic services

Product
power

United Cinemas
acquisition

Copyright (c) 2015 Lawson, Inc. All rights reserved.

Strengthen Respond
3 essential to change
practices

Joint businesswith Amazon

Joint initiatives with other companies
such as Poplar, Sunny Mart
3

Fiscal 2014 Review
Consolidated OP increased 3.5% YoY,
but fell 6.0% short of Plan.
FY2014 Actual
Consolidated Operating profit(billion yen)

Consolidated Net profit(billion yen)

70.4 (vs Plan:▲4.5 )32.6 ** (vs Plan:▲6.2 )Non-consolidated*
Net sales at existing stores (YoY)

99.0%

Non-consolidated*
Gross profit margin ratio

31.3%*excluding LAWSON MART/LAWSON STORE100 business

Copyright (c) 2015 Lawson, Inc. All rights reserved.

**Special loss of 4.2 bn. yen related to Lawson Mart and Lawson Store100 restructuring.

4

FY2014 Review: Quarterly Trends
1H： Tough competition, polarized consumption, inclement weather
Customer visits began falling in summer 2014
2H： Stronger sales promotions, etc.
Gross margin down despite slight recovery in customer numbers
Decline105.0

Action1.0

Customer spend
Daily sales

0.5

100.0

Customer numbers

95.0
90.0
(YoY, %)

+0.2%P
Gross margin ▲0.1%P
excludingcigarettes

0.0±0.0%P▲0.2%P▲

1Q

2Q

Inclement weather
Sales-tax hike⇒polarized consumption
Falling demand for staple foods
Copyright (c) 2015 Lawson, Inc. All rights reserved.

3Q

4Q

0.5

(%P, YoY)

Introduced MACHI café S-size
Increased TV commercials
Implemented strategic price changes
5

Tough Competitive Environment
A portion of our main customer base defected to othercompanies and industries

Men
Defected
where*

1. Competing
convenience stores

Women

1. Supermarkets, GMS

2. Eating out

2. Competing
convenience stores

3. Drugstores

3. Drugstores● Needed to offer more

Defected
why*

Customernumbers
down

coffee● Needed to satisfy demand
to drink at home

● Wanted more semi-

made meals to prepare
at home*Lawson survey of men and women between the ages of 30 and 59

Copyright (c) 2015 Lawson, Inc. All rights reserved.

6

Arresting the Fall in Customer Visits
Introduced strategic prices, distributed coupons to main customer base
Worked to boost customer visits by revitalizing various categories, etc.
Various actions taken since summer 2014

Men

Women

Boosting
customer
visitsIntroduce Machi S-size coffee (Sep.～) Expand large-scale sales
Spruce up chilled lunchboxes (Sep.～） OTC Fast Food 10% off sale (Aug.～）
100 yen sales of bakery items (Dec～)
Expand large-scale sales
Price Change of Key Value Items (Nov.～)
30/50 yen off lunchboxes（Dec.～)
Distribute thank you coupons
100 yen sales of bakery items (Dec.～)(Expand applicable categories from Oct.)
Refresh salad ranges (Feb.～)
Refresh salad ranges (Feb.～)
Copyright (c) 2015 Lawson, Inc. All rights reserved.

7

FY2014 2H Gross Profit Margin
Gross profit margin (excl. cigarettes) fell year on year due to pricing strategies,
discounting, and the continued decline in soft-drink sales■YoY change in 2H gross margin per category
Higher giftcard sales

Strengthened MACHI café,
cooked deli & fast food items

OTC Fast Food

+0.1%P

Gross profit
margin (excl.
cigarettes)

Commissions+0.1%P

down

Books & magazines +0.1%P
Daily goods▲0.1%P

Overall ▲0.1%P

Rice & noodles ▲0.1%P
Declining
soft-drink sales

Drinks

▲0.2%P
Discount sales andstrategic price changes

Copyright (c) 2015 Lawson, Inc. All rights reserved.

8

FY2014 2H Advertising and Promotion Expenses
Advertising and promotion (A&P)* costs up 20% YoYExpenditure on TV commercials doubled YoY
Comparative breakdown of 2H advertising costs

SG&A
expensesUP
TV commercials
Promotional discounts
Advertising campaigns
Other promotional expenses
FY2013 2H

FY2014 2H* Includes some FC owner supporting cost which is part of ‘other SG&A’
Copyright (c) 2015 Lawson, Inc. All rights reserved.

9

FY2014 Review: Existing Store Daily Sales, Gross Margins

Customernumbers• Customer visits fell on polarized consumption following
the sales-tax hike, and inclement weather• Slight improvement in 2H, thanks to new MACHI café
S-size, more TV commercials and large-scale sales

Customerspend• Declined in 2H as a result of discounting to attract
customers, and lower drinks and fast-food sales

Grossprofitmargin• Fell short of target, due to strategic price cuts anddeclining soft-drinks sales

Franchiseowners•Franchise owners’ profits deteriorated on theback of lower sales and higher costs

Copyright (c) 2015 Lawson, Inc. All rights reserved.

10

FY2015 : Actions Toward Mid-term Growth
Respond to social change + Leverage Lawson’s unique strengths
Fresh fromthe oven

Everydaysupport

Healthiercommunies

Be closer tocustomers● Fried foods, ready-● Tasty & healthy● Everyday goods/ foods● Concentrated-area

made meals, snacks● MACHI café
● Machikado Chubo instore kitchens● Healthcare-focused● Safe vegetables

LAWSON● Care-focused LAWSON● Community-focuseddelivery/dispatch● Order directly or via
visiting salespeople● Open platform

LAWSON● SEIJO ISHIIFun in thecommunity● Entertainment

all-round● Ticket, CD・DVD,
Goods● HMV,UNITED CINEMAS

3 Key reinforcements
Store

Product

Franchise Owners
Support● Overhaul franchise system● CVS core & lead items● Improve store hardware● New semi-automatic ordering system● Supermarket alternatives● Accelerate new franchise● Guaranteed quality new stores● Overhaul supply chain management

package

Based on our “Three Essential Practices”
Copyright (c) 2015 Lawson, Inc. All rights reserved.

11

Strengthen Product PowerCreation of “competitive & better products”
to respond to social change
CVS core products(must-have items)

Supermarket substitutes

Competitive& betterproducts
Radical review of
Unique differentiating items
promotion strategies

Copyright (c) 2015 Lawson, Inc. All rights reserved.

12

Strengthen Product Power
Core CVS items

Supermarket substitutes

Develop leading items in our core sales
categories, respond more fully
to demands from main customer baseStrengthen our function as a substitutesupermarket by overhauling Lawson Select,and strengthening the range ofdaily delivered foodEvening meal (ingredients):
Food delivered daily
・Cooking ingredients/sauces

Large salmon LB

Thick pork roast & fillet LB

For breakfast:
3 cheesecarbonara pasta

Evening meal (simple,
ready-made)：
Frozen foods, daily
foodstuffs

Ripe tomato neapolitan
spaghetti

Develop fresh cut
Daily essentials
vegetables
as magnets

Tuna and corn salad
Copyright (c) 2015 Lawson, Inc. All rights reserved.

13

Strengthen Product Power
Develop unique differentiators

Revolutionize promotions

Strengthen business at the counter

Clear, simple promotion

Over thecounterfast foodMore cooked meal
items and nibbles

MACHI
café

All rainforest alliance-certified beans
Differentiate menu choice

Machikado

Chubo
in-store
kitchens

Categorize product toboost customer visits

Stronger basic items

Much focusing on

Specialitems

Offer tasty, healthy foods

Overall category appeal
Much focusing on

Expand ourbran breads

Sell foods withhealth appeal

Copyright (c) 2015 Lawson, Inc. All rights reserved.

CVS
Core items

Expand healthysnacks SKU

Individual
items

Overallcategory
14

Enhance Supply Chain Management
Secure high-quality ingredients at stable prices for all stores, even against
background of weakening yen and rising raw material prices
Unique strategies to counter tough conditions, maintain high GPM

BeforeNow

Tradingcompany

Supplier
Supplier

Trading Co.

LawsonProcessor

Processor

SCI**SCI, Inc. is subsidiary of Lawson., Inc.

Negotiate directly
Ensure best timing by analyzing raw material
procurement and conditions(market price, exchnage rates)

Ready-made Package
food

Copyright (c) 2015 Lawson, Inc. All rights reserved.

BeforeProcure ready-made
items

Now

Ready
-made
food

Packing Wholesale

Heavy involvement fromraw material stage
FY2015FY2014FY2013Categories

Lawson

FF
Ready
-made
food

Rice
Package

LawsonSelectWholesale15

Revolutionizing Practices to better serve our customers
Lawson and franchise stores to create more attractive stores
Good store
guidance

Semi-automatedordering● Create system to provide● Optimize procurement ofdetailed guidance● Well developed FC storeorganization● Boost supervisor skills

ready-made food, likelunch boxes, sandwiches● Reduce operation time ofstore crews

Planned orders● Optimize purchasing ofsuch as beverage, snacks,and daily goods● Simplify operations

Attractive stores ＝ Stores that please customers●What customers want are available every day●Uncover the hidden needs of customers
Copyright (c) 2015 Lawson, Inc. All rights reserved.

16

Enhance Store Power: Semi-automated Ordering
Suggests optimum inventory levels, based on Ponta member data
Recommended merchandise assortment

System35,000 calculations a day
Stock recommendations

4 times a day

Ponta
Member data
New products/strategies
Products tosuit individualstores’ customer baseProducts boughtby heavy users
in each store
Top-selling products
in each stores■Actual example: Estimated rice-ball sales(number)

300

0

POS

Actual200
100

Producesrecommended levels
by matching individualstore data with 1.08
billion total Pont
member data

Forecast
1/20

Improvement
1/27※Results from 82 leading test site stores
Copyright (c) 2015 Lawson, Inc. All rights reserved.

2/1 (week)

Enables more time to be
spent on customers(customer service, betterin-store cooked food, etc.)17

Accelerate Introduction of New franchise contract package- Lawson HQ will share the risks and support to create appealing and attractive stores- Support franchise stores to execute aggressive purchasing

End FY2014: Approximately 3,500 stores⇒End FY2015: 6,000 stores
New franchise contract package:- HQ to bear 50% of electricity costs- HQ supports portion of food disposal depending
on franchise store’s disposal loss ratio- Revise charge ratios, etc., Increase charge
income of HQ

Taken from FY2011 business results documentation
Copyright (c) 2015 Lawson, Inc. All rights reserved.

18

Organizational Restructuring
Operations & store
development● Ensure information transmitted directly between mangers and HQ

to stores● Independent reporting lines to ensure operations and store
development focus on their individual missions

Product lines● Combine nine partially optimized category-specific productFranchise
Operation Support
Div.

● Establish a Franchise Operation Support Div. to improvesections into there new product sections

franchise guidance and support

Change organization to boost:Store power
Copyright (c) 2015 Lawson, Inc. All rights reserved.

Product power

Strong franchise links
19

Maintain Existing-store Sales, Improve FC owners’ Profits
FranchiseownersStrengthen must-have products
Customers
Recommend product ranges for individual stores
Achieve optimum inventory levels

Create extra time by
reducing order times

Buy what you wantwhen you want

Use extra time toimprove customer
service, fast foodofferings, store appeal

Boost levelof satisfaction

Copyright (c) 2015 Lawson, Inc. All rights reserved.

Boost
existing-storesales
20Fast Food Freshly Made for You
Differentiate our stores by expanding Lawson’s
renowned over-the-counter fast-food range
Value-added: Fast Food Freshly Made for You at the store- Aggressive expansion of fast food served at the counter
Boost profits by offering value-added ready-made, special counter food todifferentiate Lawson from other competitors

Ready-made food
Food cooked in-store

Eat at home

Drinking at home

Main dishes

Side dishes

Meat croquet

Yamitsuki garlic andsesame chicken

SnacksKara’age-kun
Machikado Chubo
Copyright (c) 2015 Lawson, Inc. All rights reserved.

L-size chicken
nougats

Café
CoffeeMACHI café

21

Contributing to the Health of Local Communities
Enhancing community health

HealthConvenience
Lawson healthcare system

Tasty health foodLifestylesupport,
OTC drugs

Balanced grilled mackerel Lunch Box

Bran bread

Care

Healthcare-focused
LAWSON

Care-focused
LAWSONIn the home
Medicalcare

NATURAL LAWSON’s healthy snacks and drinks

LAWSON pharmacy
storesLAWSON hospital
storesFor an ageing, health-conscious society●Develop unique healthy foods such as bran bread●Develop as the market pioneer LAWSON in hospital and Care-focused LAWSON
Copyright (c) 2015 Lawson, Inc. All rights reserved.

22

Enhancing Lawson’s Lifestyle Support Services

Essential everyday foods

Essential everyday goods
Products●Bigger displays of cut

Renewed Lawson
SelectCut vegetables

Community-focused
LAWSON
Flagship stores tosupport daily lives

vegetables, fresh foodsdelivered daily, delicatessen
items, etc.
●Stronger range ofcondiments, washing powder
and other household goods
Fast food deli items

Store equipment

Fresh produce

Regular LAWSON stores
Expand range of everyday
essentials in regular stores too●More open chilled cases,

and higher shelves●More freezer display cases

Convenient support for busy working women and elderly people●Aim to have 2,300 community-focused LAWSON by end of FY2015●Use Lawson Farm and the Nakashima farming method to promote safe, reliable vegetables
Copyright (c) 2015 Lawson, Inc. All rights reserved.

23

Getting Closer to the Customer – Open Platform Strategy
SG Lawson Co., Ltd. to manage home-delivery in small commercial areas

500m radius

Fulfill local needs throughhome delivery and visiting
salespeople

Hub stores

500m radius

Deliver to nearby
Lawson if not at home

Dominate a small
commercial areasurrounding a central
hub store

Outsourcing the delivery function
LawsonJoint food deliveries within
500m radius

Deliver light packages within
500m radius

Copyright (c) 2015 Lawson, Inc. All rights reserved.

Entrust home delivery of CVS
goods
24

Getting Closer to the Customer – Open Platform Strategy
Outsourcing delivery services and visiting sales
for small commercial areas
Joint operating company

Shopping support
CVS
deliveryUtilize LAWSON
stores as delivery
channelFocal support store (hub store)

100 stores in urban
areas in first fiscal year

Housewives and seniorcitizens in the community
as delivery staff

Delivery and visiting
sales services in small
commercial area

Copyright (c) 2015 Lawson, Inc. All rights reserved.

General life
support:Queries, help
with shopping,Supermarket
delivery

LB freshly
cooked instore

Onlinesupermarket
14,000 SKU
incl. fresh
fruit & veg.

Respond to customer requests
Healthfoods

Entertainment

Support for everyday living
LivingCleaning,
house help,
removalsHousehold
jobs

Water
problems,
lock changing,refurbishment

25

Overseas business
China (Shanghai, Chongqing, Dalian, Beijing)●Gain majority share of subsidiaries and seek thepenetration of Lawson brand in the market.
●Establish profitable business model with hands-on
initiatives.

China
Other
Areas

South East Asia (Indonesia, Thailand, Philippines)●Open the first LAWSON Store in the Philippines.
●Expand business leveraging the cooperation withpowerful local partners.

South East
Asia

Others (new areas including North America)●Build on the Hawaii operation as a step to enter
into the mainland U.S.

Growth Steps for overseas strategy
Seek differentiation of
products/services andimprovement in brandrecognition while meeting
regional needs.
Copyright (c) 2015 Lawson, Inc. All rights reserved.

Establish Japanese-style
convenience store
operations, including
distribution systems andvendor networks.

Aim to become “community
infrastructure” that is
indispensable in the region,
as a manufacturing retailer
focused on small commercial
areas,
26

FY2015: Maintain Existing-store Sales, Improve FC Profits
Strengthen store and product power for customers to boost
FC profits
Concentrated investment to strengthen existing stores(Higher capex and cost burdens)

Maintain existing-store sales
Boost Franchise owner profits
Copyright (c) 2015 Lawson, Inc. All rights reserved.

27

FY2015: Strategic Investment in Existing Stores
Investment & spending to maintain existing store sales andboost FC profits
FY2015 plan
+2,000 Community-focused LAWSON+600 Machikado Chubo installed stores

Non-consolidated existing store investment

Approx. 25 billion yen
Including leases

Non-consolidated SG&A expenses

Stronger TV ads and promotions
Accelerate new-style FC contracts

Copyright (c) 2015 Lawson, Inc. All rights reserved.

＋2 billion yen YoY
Others＋2 billion yen YoY
A&P28

New Store Strategy
Quality and quantity. 1,200 new stores scheduled for
FY2015FY2015 Lawson store opening
strategy in Japan
Open

1,200

Close (exc. LS100stores)

450

Net increase

750*Net increase of 450 stores when the 300 store closures related to theLawson Store 100 restructuring plan are included.

Copyright (c) 2015 Lawson, Inc. All rights reserved.

29

FY2015 Forecast
We expect consolidated OP will rise.
FY2015 Forecast
ActualYoY cange

Non-consolidated

Net sales at existing stores (YoY)*

100.0%

Gross profit margin difference (YoY)*＋0.2%P

Selling, general and administrative expenses (YoY)
Operating profit (billion yen)

Subsidiary Companies and others (billion yen)

Consolidated Operating profit (billion yen)

+5～10%
58.5

▲2.4
96.0%

12.5

＋2.9
131.6%

71.0+0.5
100.7%*excluding LAWSON MART/LAWSON STORE100 business

Copyright (c) 2015 Lawson, Inc. All rights reserved.

30

ROE
Temporary fall in FY2014 due to special losses
ROE expected to resume upward trend from FY2015 onwards
ROE
(%)

13.5％
(FY2015 forecast）(FY)

Copyright (c) 2015 Lawson, Inc. All rights reserved.

31

Dividend
No change in fundamental strategy to gradually increase
shareholder returns

Changes in annual dividends per share and dividend yield(JPY)

Copyright (c) 2015 Lawson, Inc. All rights reserved.

245
JPY

32

Financial Discipline – Cash Flow
Rough picture of cash flow based on convenience store
business in Japan (opening 1,000 stores)

Investing cash
flow
Approximately
Operating cash 60 billion yen
flow
Approximately
100 billion yen
Free cash flow
Approximately
40 billion yen
Copyright (c) 2015 Lawson, Inc. All rights reserved.

How free cash flow is used
Lease
repayments
Dividends
33

Corporate GovernanceIndependent officers with various professional backgrounds
Member of the Board (Outside)
Management
Executive

Reiko Okutani
Chairman, The R Co., Ltd.

Formercivil servant

Management
Executive

Emi Osono

Shinichi Hokari
Former the Board of Audit of Japan

Member of the Board (Outside)
Professor

Corporate Auditor (Outside)

Corporate Auditor (Outside)
LawyerTetsuo Ozawa

Professor, Graduate School ofInternational Corporate Strategy,
Hitotsubashi Unibersity

Lawyer, Tokyo Fuji Law OfficeMember of the Board (Outside)

Corporate Auditor (Outside)

Sakie Akiyama
Chief Executive Officer, Saki Corporation

Professor,
CPA.

Eiko Tsujiyama
Professor, School of Commerce andGraduate School of Commerce,
Waseda University

6 independent officers out of 8 directors and 4 auditors
Copyright (c) 2015 Lawson, Inc. All rights reserved.

34

Medium-term Roadmap● Initiatives toward 1) 100 billion yen in operating profit and 2) ROE 20%● Maintain capital discipline with emphasis on ROIC
● Differentiation by products with high GPM and multiple store formats● High customer retention through CRM leveraging Ponta card data

analysis● Productivity improvement through SCM reform● Capitalize on consolidation opportunities
Gross
operating profit

Consolidated
operating profit
100 billion yen

Non-consolidated
LawsonConsolidated
subsidiaries

ROE 20%
Dividend increase/share buy-back andcancellation
Copyright (c) 2015 Lawson, Inc. All rights reserved.

Increase grossprofit margin by
0.4%point per year

Selling,
general andadministrative
expenses

Existing stores'
gross profit

Net increasein stores
by 5% per year

Industry
consolidation

35

Financial Results for FY2014

Copyright (c) 2015 Lawson, Inc. All rights reserved.

36

Earnings Summary of FY2014
Net sales of all stores
Operating profit
Operating profit ratio
Recurring profit
Net profit
EPS (Yen)
Dividend per share (Yen)ROE

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

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

Total no. of stores in Japan

11,13011,606(Consolidated：Billions of yen)

Actual
1,961.9
70.4
3.6%
71.7
32.6
327.08240
13.0%

FY2014
YoY
100.9%
103.5%+0.1%P
104.1%
86.1%▲ 52.96+20▲3.1%Pvs. Plan
99.0%
94.0%
▲0.2%P
97.0%
84.0%▲62.25▲2.4%P

12,383+777+95

Note: FY2014 total chain store sales includes sales from the convenience store operation in Japan, overseas operations and sales from Seijo Ishii(consolidated items only). Regarding Seijo Ishii, only the sales of direcctly operated stores are included.
Note: The number of stores in FY2014 is the total number of convenience stores in Japan operated by the Lawson Group plus the number of directly
operated Seijo Ishii stores.
Note: Following changes in FY2014 to the method for counting store numbers, the FY2014 number includes extra small stores (82 stores as of March 1,
2014).
Note: Change indicates comparison with plan announced along with the FY2014 2Q results. second quarter of FY2014.

Consolidated operating profit increased 3.5% YoY, but fell 6.0% short of plan
MACHI café renewal and stronger sales promotions to counteract tough competitive environment and polarized
consumption trend. Measures to strengthen existing stores: Aggressive introduction of Machikado Chubo stores,
injection of funds to boost product ranges.
Consolidated net profit fell sharply, contracting 13.9% YoYSpecial loss rose by 49 billion yen YoY on the back of goodwill amortization at our Chinese subsidiary and losses
relating to Lawson Mart and Lawson Store 100 restructuring.
Copyright (c) 2015 Lawson, Inc. All rights reserved.

37

Existing Stores (Non-Consolidated*)* excluding LAWSON MART/LAWSON STORE100 business<FY2014>Gross profit margin up 0.3ppt

Existing store sales down 1.0%
(number of customers down 2.0%,
spending per customer up 1.0%)

Existing-store sales fell 1.0% YoY. Poor conditions in the 1H dragged existing-store sales down,on the back of inclement weather, polarized consumption patterns following the sales-tax hike.
Customer visits picked up somewhat in 2H.
Gross profit margin rose 0.3ppt YoY. Falling cigarette component of sales, stronger counter fast
food, processed foods and non-food items helped boost profit margins. But the overall grossmargin, excluding cigarettes, held flat YoY, following our strategic price cutting moves, etc.
As a result, gross profit at existing stores, which correlates closely to profits at franchise stores,
held flat YoY
Copyright (c) 2015 Lawson, Inc. All rights reserved.

38

Store Openings (Non-Consolidated*)(Net store increase)*excluding LAWSON MART/LAWSON STORE100 business(Daily new store sales in 1,000 yen)

968
625

343

Store openings: Included 89 stores converted from Sunkus in Osaka and other areas, and 40
stores converted from Three F in Kochi. Tough competition knocked daily sales per new store
down YoY to 484,000 yen.
New store openings, store closures, and the net increase in store numbers were in line with plan.
FY2015 plans (excluding Lawson Mart/Lawson Store 100):1,130 stores openings, 430 closures. Net increase: 700.
Copyright (c) 2015 Lawson, Inc. All rights reserved.

39

Key Components of SG&A Expenses
FY2013
Actual
213.9(Billions of yen)

Selling, general & administrative expenses
Non-consolidated

Consolidated SG&A expenses

Compared to Fiscal 2013

Consolidated

Copyright (c) 2015 Lawson, Inc. All rights reserved.

35.8
14.7

36.6
12.7

+0.8
▲ 2.0

Increase 0-5%
Decrease 5-10%

9.0
118.1

8.2
127.4

▲ 0.8
+9.4

Increase 20-30%
Increase 5-10%

290.4

299.3

+8.8

Increase 15-20%

Compared to Plan
Non-consolidated Consolidated

Non-consolidated

Increased after SG&A expenses from Seijo Ishii and United
Cinemas were incorporated into consolidated accounts.

FY2015
Forecast
Increase 5-10%*Including the impact of around 7% from thebusiness restructuring of Ninety-nine Plus.

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

A&P: Up approx. 900 million yen YoY including productsupport extended via new FC contracts.
Equipment: Large increase relating to transfer of control of
Ninety-nine Plus, higher store numbers.

FY2014
Actual Change
232.9
+18.9

+2.7 billion yen v. plan
Increased expenditure relating to review ofcharges,commission system with Lawson Mart.

+4.9 billion yen v. plan
Includes SG&A expenses from Seijo Ishii and United
Cinemas in consolidated accounts.
40

Earnings of Major Subsidiaries(Billions of yen)

＜Operating Profit of Major Subsidiaries＞
Lawson Mart, Inc.
SEIJO ISHII CO., LTD.
Lawson HMV Entertainment, Inc.
Lawson ATM Networks, Inc.
Chongqing Lawson, Inc.
Shanghai Hualian Lawson, Inc.

FY2014FY2015

FY-endOwnership

ActualYoY change

Forecast

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

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

1.76
1.54
3.09
5.93
▲ 0.90▲ 0.64+1.66+0.27▲ 0.15▲ 0.06▲ 0.24

0.50
4.90
3.20
5.60
▲0.80
▲0.90

Note: The FY2014 data for new ly consolidated Seijo Ishii includes the 3 months of data (Oct.-Dec. 2014) included in the consolidated income statement

Lawson Mart

700 million yen loss (incl. operation HQ at parent). FY2015E: Turn a profit in 2H
on product strategy review, 300 store closures, concentrated store area, low-cost
operations.

SEIJO ISHII

Included 4Q (Oct.-Dec. 2014) in consolidated P&L. Contributed 1.3 billion yen to
consolidated operating profit, after amortization of goodwill and other.

Lawson HMV Entertainment

Profit up on back of strong ticket sales for large-scale events and entrance totheme parks. United Cinema incorporated from FY2014 3Q.

Lawson ATM Networks

Slight fall in profit: Net result of fall in daily ATM usage, rise in new ATMs
introduced in line with net increase in store numbers, review of ATM operating
costs.

Copyright (c) 2015 Lawson, Inc. All rights reserved.

41

FY2013 Consolidated Balance Sheet

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

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

Total Assets

As of Feb. 28, 2015

Change fromFeb. 28, 2014

223.6
76.7
58.6
540.9
274.4
79.5
48.1
187.0
37.2
93.2
764.6

27.8
▲0.0
4.4
115.7
40.9
51.0
38.4
23.7
3.5
7.0
143.6

(Billions of yen)
Change from
As of Feb. 28, 2015
Feb. 28, 2014

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

Net Assets(Common stock)(Retained earnings)

Liabilities and net assets

301.0
103.4
103.6
199.7
58.4
29.9
263.7
58.5
147.1
764.6

54.3
14.2
16.0
75.9
58.4
▲ 2.2
13.2
9.0
143.6

Large YoY increase in fixed liabilities (long-term borrowings) and intangible assets (goodwill)
linked to the acquisition of Seijo Ishii and United Cinemas.
Current assets (products) and current liabilities (trade payables) increased on the back of theconsolidation of Seijo Ishii’s directly operated store operation, and the expanded scope of SCI.
Copyright (c) 2015 Lawson, Inc. All rights reserved.

42

Cash Flows and Capital Expenditures (Consolidated)（Billions of yen）

Consolidated Capital Expenditures FY2012
ActualNew stores
33.1
Existing stores
8.7
IT-related
5.9
Other
3.2
Subtotal for capital expenditure
51.0
Depreciation and amortization

43.8

FY2013
Actual
32.2
7.0
5.3
2.0
46.7

FY2014
Actual
49.0
5.8
8.2
2.7
65.8

FY2015
Plan
53.5
10.0
13.0
1.0
77.5

47.8

41.8

50.9
（Billions of yen）

Consolidated Cash flows
Cash flows from operating activities

FY2012
Actual

FY2013
Actual

FY2014
Actual

FY2015Plan
Approx. 100.0

Free cash flows

85.1▲ 54.1
30.9

81.5▲ 47.933.5

110.5▲ 100.4
10.1

Approx. ▲80.0
Approx. 20.0

Cash flows from financing activities▲ 31.9▲ 39.6▲ 3.2

Approx. ▲45.0(Cash dividends paid)▲ 19.2▲ 20.9▲ 22.9▲ 24.2

72.7

68.7

76.7

Cash flows from investing activities

Cash and cash equivalents at end of period-

In FY2014, investment cash flow increased in relation to the Seijo Ishii acquisition.
FY2015E: High investment cash flows on strengthening of existing stores, systems investment, etc.
Copyright (c) 2015 Lawson, Inc. All rights reserved.

43

FY2015 Company Forecast, Consolidated
Net sales of all stores
Operating profit
Operating profit ratio
Recurring profit
Net profit
EPS（Yen）
Dividend per share (Yen)ROE

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

FY2014
Actual
1,961.9
70.4
3.6%
71.7
32.6
327.08240
13.0%

FY2015 Forecast
Plan
YoY
2,074.0
105.7%
71.0
100.7%
3.4% ▲0.2%P
68.9
96.1%
35.2
107.7%
352.00+24.92245+5
13.5%+0.5%P

Total no. of stores in Japan

11,606

12,383

12,846+463

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

101.5%
99.8%
31.0%

100.0%
99.0%
31.3%

100.7%
100.0%
31.5%+0.7%P+1.0%P+0.2%P

Gross profit margin difference excluding cigarettesales (YoY)+0.4%P±0.0%P±0.0%P±0.0%P(Billions of yen)(Non-consolidated*)*excluding LAWSON MART/LAWSON STORE100 businessNote: FY2014 total chain store sales includes sales from the convenience store operation in Japan, overseas operations and sales from
Seijo Ishii (consolidated items only). Regarding Seijo Ishii, only the sales of direcctly operated stores are included.
Note: The number of stores in FY2014 is the total number of convenience stores in Japan operated by the Lawson Group plus thenumber of directly operated Seijo Ishii stores.

Despite concentrated investment to help boost FC profits and strategic expenditure,
we expect consolidated OP will rise on strong contribution from Seijo Ishii.
Copyright (c) 2015 Lawson, Inc. All rights reserved.

44

Reference

Copyright (c) 2015 Lawson, Inc. All rights reserved.

45

Half Year Breakdown of FY2015 Forecast(Consolidated: Billions of yen)

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

FY2015 Forecast
1st Half
2nd Half Full year
1,046.0
1,028.0
2,074.0
37.0
34.0
71.0
3.5%
3.3%
3.4%
36.0
32.9
68.9
18.4
16.8
35.2

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

Gross profit at existing stores (YoY)

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

100.2%
99.5%
31.5%

101.2%
100.5%
31.5%

100.7%
100.0%
31.5%

Note: FY2014 total chain store sales includes sales from the convenience store operation in Japan,
overseas operations and sales from Seijo Ishii (consolidated items only). Regarding Seijo Ishii, only thesales of direcctly operated stores are included.

Copyright (c) 2015 Lawson, Inc. All rights reserved.

46

Number of Convenience stores in Japan
FY2013

FY2014

Total LAWSON
and NATURALLAWSON stores.

FY2015 (Plan)

Total LAWSON
and NATURALLAWSON stores.

Ttotal LAWSON
and NATURALLAWSON stores.

Non-Consolidated

Opening

735

735

979

968

1,150

1,130

Closure

363

352

400

343

730

430

Net Increase

372

383

579

625

420

700

Total numberof stores

11,337

10,135

11,90010,74912,192

11,351(3)(1)(5) (1)Control of 120 Kagoshima branch storesGroup Company

(4)

Total

Opening

139

31

Closure

35

22

20

Net Increase

104

9

30

Total numberof store

269

376

534

Opening

869

1,010

Closure393

Net Increase
Total numberof stores

(2)

(3)

50

1,200

422

750

476

588

450

11,606

12,276

12,726

Copyright (c) 2015 Lawson, Inc. All rights reserved.

(6)transferred from parent to Lawson Minami
Kyushu at beginning of FY2014.
(2)Control of 24 Lawson Kumamototransferred to parent at beginning of
FY2014.
(3)82 extra small stores (parent 80, Group2) included in store numbers from FY2014.
(4)5 stores transferred between Lawson,
Natural Lawson and Lawson Store 100.
(5)On April 1, 2015, control of 128 stores in
Kochi prefecture will transfer from theparent to Lawson Kochi.
(6)During FY2015, it is planned to convert
30 stores to different store brands among
Lawson group.
47

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

Copyright (c) 2015 Lawson, Inc. All rights reserved.

48