Q&As at the Financial Results Briefing for FY2022 of Lawson, Inc.
DateApril 14, 2023, Friday, 10:00–11:30

Attendees

Sadanobu Takemasu, President and CEO, Representative Director,
Chairman of the Board
Masayuki Itonaga, Member of the Board, Executive Managing Officer,
Chief Financial Officer
Tomoki Takanishi, Senior Vice President, Division Director of Financial
Administration Division
Kino Arai, General Manager, Investor Relations Dept.

Q: Can you tell us some details about the marketing measures, etc. included in your FY2023 plan,
which are expected to increase by approximately 10.0 billion yen year on year?
A: First, we will continue to pursue our HAPPY LAWSON PROJECT. We started implementing thisproject in June FY2022, so we expect to be spending more on marketing the project between
March and June 2023 than we did in March to June 2022. We will also focus our attention on
supporting product ranges in order to eliminate differences between individual stores. Insteadof concentrating on temporary support for utilities and personnel costs, we intend toimplement support measures that will help boost customer appreciation and to build systems
that will help franchise owners gain a real sense of how profits are improving.

Q: Please tell us about IT-related costs, etc. in the FY2023 plan, which are expected to increase
by approximately 4.0 billion yen year on year?
A: (CFO) The main elements here include upfront costs relating to the introduction of new semiautomated ordering systems from early spring 2024 and expenditure on systems
improvements relating to the invoice system that we will be introducing from October 2023.
While depreciation costs will increase to a certain extent as we start to use the new semiautomated ordering system, we will depreciate some assets in FY2023, so we do not expect
any significant increase in depreciation expenses from FY2024 onwards.

Q: You say that you are aiming to achieve consolidated operating income of at least 100.0 billion
yen in FY2025, but what income trajectory do you envisage through FY2025?
A: After firmly securing the everyday demand that we acquired during the COVID-19 pandemic,
we believe it is important to increase daily sales by tapping into the recovery in people flows
and inbound demand. If we are able to successfully achieve that in FY2023, we feel that wewill be able to accumulate greater profits from our Domestic CVS business and the otherbusinesses in FY2024 and then work towards our target for FY2025.

Q: You plan to inject 10.0 billion yen in marketing measures, etc. in FY2023, but how much ofthis has already been earmarked, and do you think you will use the whole amount? Regarding
your business portfolio strategy, you view Domestic CVS business as your core business, butwould it not be better to channel your investment into businesses that offer higher growthpotential, such as Overseas business and Entertainment-related business? Also, what is yourcapital policy for Seijo Ishii?
A: We will implement marketing measures on the premise that they will help eliminate
discrepancies between individual stores. Regarding investment into other areas outside of ourDomestic CVS business, we have been exploring options for investing in our Overseas business,
especially in China, but we have not finalized any specific projects at this time. We are also
looking at potential M&A options to help promote our Entertainment-related business, but wecurrently have no concrete proposals, so we have based this latest plan on organic growthpotential. As for

Domestic CVS business, we believe that we will be able to continue toachieve stable growth by improving the attractiveness of our stores and offering delivery andother services. Regarding Seijo Ishii, we withdrew the company’s public listing application lastyear. We need to arrive at some conclusions on capital policies regarding not only Seijo Ishii,but also our partnership strategies in China. We intend to consider various options to help
determine a comprehensive overall capital policy as we approach FY2025.

Q: Can you update us on latest developments in your Overseas business (China)?
A: At our Overseas business, we are looking to achieve operating income of roughly 10.0 billion
yen in FY2025 from the China and Asia-Pacific regions combined. We are looking to steadily
increase daily sales in China from April as that market recovers from the pandemic. We also
hope to be able to generate operating income of over 7.0 billion yen in FY2025 by exploiting
economies of scale as we increase store numbers and purchasing volumes. As for the AsiaPacific region, we have high expectations regarding our business potential in the Philippines.
We want to create a framework that will help generate operating income of 3.0 billion yen
from that region in FY2025.

Q: Does your FY2025 target for 10,000 stores in China include stores acquired throughpartnership strategies?
A: The 10,000 store target does not include any increase based on partnership agreements.
Naturally, we will consider M&A opportunities, but we believe that we can develop a 10,000
store network even without any additional partners.

Q: What approach are you taking with regards to cash flow as you seek to strengthen shareholder
returns?
A: (CFO) Our adjusted operating cash flow figure for FY2022 stood at approximately 120.0 billion
yen. If we take cash spent on investment activities into account, then free cash flow stood at
approximately 80.0 billion yen. We repay borrowings and pay dividends of approximately 15.0billion yen from within that amount, resulting in a positive net cash flow. If you look at ourcurrent cash flow levels and consider the specific characteristics of our business model, which
is able to accumulate profits and recover cash fairly easily from our future Domestic CVS
business and the other businesses, we do not believe there is any need for concern on thecash flow front.

Q: To achieve a consolidated operating income of 100 billion yen in FY2025, you would need toincrease income by approximately 43 billion yen over a period of 2 years. I think that is a highhurdle, but what discussions have you had within the company on this point?
A: We have had considerable internal discussions about achieving a consolidated operating incomeof 100 billion yen and an EPS of 500 yen in FY2025. We decided to challenge these specifictargets after conducting a thorough review and discussing our Domestic CVS business and theother businesses from scratch.

Q: Are we right in thinking that you are committed to providing a minimum dividend per share of
250 yen for FY2025, even if business growth proves sluggish?
A: Our current dividend policy for FY2025 involves setting a minimum dividend per share of 250
yen or applying a dividend payout ratio of 50%, whichever is higher.

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