First Half Results for FY2020(Six months ended August 31, 2020)

Lawson, Inc.
October 9, 2020

Copyright (c) 2020 Lawson, Inc. All rights reserved.
Copyright (c) 2020 Lawson, Inc. All rights reserved.

Financial Results forFirst Half for FY2020
Satoshi Nakaniwa
Executive Managing Officer
Chief Financial Officer
Lawson, Inc.
Copyright (c) 2020 Lawson, Inc. All rights reserved.
Copyright (c) 2020 Lawson, Inc. All rights reserved.

Consolidated Financial Results for FY2020 1H
FY2019(Billions of yen)

FY2019Operating income

36.7

16.6

Year-on-yearchange-20.0

Ordinary income

35.1

14.8

-20.2

30.0

Net income

20.1

3.3

-16.7

5.0

Comparable store sales YoY

100.4%

91.0%-9.4pt95.2%

Gross profit margin

31.2%

31.3%

+0.0pt31.3％

Domestic CVS stores (stores)

14,721

14,500-221

14,544(Non-consolidated)

1H Results

1H Results

Initial full-year
plan
35.0

(excl. Lawson Store 100)

１．Consolidated operating income 16.6 billion yen (-20.0 billion yen YoY, 48% of initial full-year forecast)Profit down on lower charge income, which declined in line with declining Japan CVS franchise store sales, and stronger franchise store support
measures in the face of COVID-19. Entertainment business profit also down on cancellation of performances and events and postponement of
new movie releases.
２．Consolidated net income 3.3 billion yen (-16.7 billion yen YoY, 66% of initial full-year forecast)In addition to the above factors, profit down primarily due to the recording of losses relating to COVID-19 as special losses.
３．Existing-store sales -9% YoY (Number of Customers -15.5%, Spending per Customer +7.7% YoY)
Copyright (c) 2020 Lawson, Inc. All rights reserved.

3

FY2020 Consolidated Operating Income
SEIJO ISHI CO., LTD.
+13
Lawson Entertainment, Inc. -24
United Cinemas Co., Ltd.
-58
Other – net-11

Initial full-year plan

Approx.
-180

629

Income from
franchised stores（Decrease of
CVS sales)

Approx.
-35
Expensesrelated franchisee

Existing-store sales
July, August. 95.0%
Second half 98.0%
Fiscal year
95.2%

FY2019Consolidated
operating income
Copyright (c) 2020 Lawson, Inc. All rights reserved.

(Unit: 100 million yen)

Approx.
-80

Approx.
-10

Approx.
+25

Subsidiaries

Various measures

Cost reduction,
etc.

350

Merchandising, Labor-saving, etc.

*Financial image rounded to the nearest 0.5 billion yen for clear viewing

FY2020Consolidated
operating income(Plan)

４

FY2019 Initiatives Review(Billion of yen)
FY2019Units: Billions of Yen)
Consolidated operating
incomeVarious measures

Income from charge fees (fromfranchised stores)

Group companies

New measures, etc.

Cost-cutting, etc.

Total
Copyright (c) 2020 Lawson, Inc. All rights reserved.

Full-year actual

Full-year initial plan

1H actual

Full-year revision plan

62.9

35.0

16.6

35.0

Initiatives taken and progress madeFranchise store support

FY2020Working on reducing disposal losses and other cost-control measures to help improve franchise
store profits. While gross profit margin held steady YoY, we were unable to fully respond tochanging customer needs, resulting in a 9% decline in daily sales at existing-stores. Working toachieve initial plan for a 2% year-on-year decline in daily sales at existing-stores in 2H.

Initial plan(full year)

Actual
(1H)

Revisions(full year)

-18.0

-16.0

-20.0



Currently helping low profit-generating stores with product lineups.

-3.5

-2.5

-3.5




Seijo Ishii: Remains strong on buoyant eat-at-home demand,Entertainment business: Faced inevitable event cancellations or postponements, lower ticket
handling volumes, and smaller movie theater audiences, but restrictions on events and numbers
appear to be easing.

-8.0

-5.0

-8.0



Scheduled to implement measures to strengthen the power of our products and introduce
instore labor-saving initiatives in 2H of FY2020.

-1.0

0

-1.0



Persistent cost-control measures such as reducing sales charges by cutting disposal losses andreducing advertising expenses and head office costs, etc.

+2.5

+3.5

+4.5

-28.0

-20.0

-28.0

*Estimated financial magnitude rounded up to the nearest 0.5 billion yen for simplicity.
*Numbers that have changed plans are underlined in red.

5

FY2020 Consolidated Operating Income
Full-year
revision planSEIJO ISHI CO., LTD.
+13
Lawson Entertainment, Inc. -24
United Cinemas Co., Ltd.
-58
Other – net-11

Approx.
-200

629

Income fromcharge fees(from franchised
stores)Approx.
-35

Approx.
-80

Expensesrelated franchisee

Subsidiaries

Existing-store sales
First half
91.0%(Actual)
Second half 98.0%
Fiscal year 94.5%

FY2019Consolidated
operating income
Copyright (c) 2020 Lawson, Inc. All rights reserved.

Approx.
-10
Various measures(Unit: 100 million yen)

Approx.
+45
Cost reduction,
etc.

350

Merchandising, Labor-saving,etc.

*Estimated financial magnitude rounded up to the nearest 0.5 billion yen for simplicity.
*Numbers that have changed plans or assumptions are underlined in red.

FY2020Consolidated
operating income(Plan)

６

FY2020 Full-Year Plan
(Unit: billion yen)
FY2020Initial plan (full year)

Consolidated operating
incomeActual (1H)

Revisions (full year)

35.0

16.6

35.0

Lawson

25.0

12.5

25.0

SEIJO ISHI

10.4

5.1

10.4

Lawson Entertainment

-0.1

0

-0.1

United Cinemas

-2.4

-0.8

-2.4

5.0

3.3

5.0

150 yen-

150 yenMain company operations

Consolidated net income
Dividends per share(Note)・Existing stores sales: 94.5% (YoY-5.5%)・ Gross profit Margin : 31.3%(YoY ±0%P)・ Store number :Store opening 400 Store closure 350
Copyright (c) 2020 Lawson, Inc. All rights reserved.

Net store numbers 50

７

FY2020 Initiatives

Sadanobu Takemasu
President and CEO
Representative Director
Chairman of the Board
Lawson, Inc.
Copyright (c) 2020 Lawson, Inc. All rights reserved.
Copyright (c) 2020 Lawson, Inc. All rights reserved.

LAWSON‘s vision - Sustainable growth The No.1 recommendationfrom all customers
Promise 1
Superior taste• Providing Safety/Security-Oriented
Overwhelmingly High Value-Added
Products and Services Friendly toSociety and the Environment

Promise 2
Human kindness

Improving franchise
store profits
Promise 3
Environmental(machi) friendliness・Supporting Health Promotion for All People ・Coexisting Synergistically with Communities byThrough Products and Stores
Serving as Part of Social Infrastructure
・Providing Comfortable Work Environment ・Sustainable Environment Preservation
Leading to Job Satisfaction
Activities Toward Carbon-Free Society・Supporting Women, Senior People
as well as Children’s Growth

Inspire franchise
store work and employees
Copyright (c) 2020 Lawson, Inc. All rights reserved.

9

LAWSON‘s vision - Sustainable growth -Copyright (c) 2020 Lawson, Inc. All rights reserved.

10

Sustainable Growth Initiatives (1)Plastic reduction■ Compatible with charging for plastic shopping bag. Promote the popularization of portable bags.
● A total of 5.41million portable bags had been distributed■ Reducing containers and packaging Plastic Consumption● Changed MACHI café's ice coffee S-cup to paper materials● Sales of boxed meals (NATURAL LAWSON) using paper containers

Reduction of food loss
■ Promoting the recycle of unsold food products.
■Conducting experimental food waste collection utilizing Lawson’s
distribution network.

CO2 savings
 Installing CFC-free (CO2 coolant) freezing andrefrigeration systems.

11Sustainable Growth Initiatives (2)2030 50％ cut

Food loss

2018

2025

2030

2030 30％ cut

2030 100％ cut

2030 30％ cut

plastic containers

single-use
plastic bags

CO2 emissions

2017

2025

2030

2020

2025

2030

2020 target -2.25％
1H result-4.5％2020 target -5.0％
1H result-5.2％

2020 target -40.0％
1H result-75.3％(preliminary)(preliminary)(preliminary)Ahead of plan. Offset
slow progress caused
by lower sales withgreater enforcement

More people declined
paid bags than
expected. Simplifying
checkout operation

Disposal rate: 4.43％
Improving ordering
accuracy and reducing
unnecessary disposal

2013

2025

2030

2020 target -6.0％
1H result-8.6％(preliminary)

Faster progress on
switching powercompanies andinstalling store LED

12

Changing Operational Climate: COVID-19
Announcementof state of
emergency

Authorities request people torefrain from all unnecessary,
non-urgent excursions

Fear of prolonged
infection risk

Stay-at-home consumption

Hoarding

Strengthen our strengths

Strengthen 5 categories

Desserts/Machi Café/Fast food/Machikado Kitchen

Fresh food/frozen food/ Daily food/Alcoholic
beverages/Japanese & Western sweets

13Changing Customer Purchasing Patterns(1)Many customers living nearby visited stores
during voluntary lockdown period

Rise in Lawson card members(Pre- COVID-19 rise v. voluntary lockdown period)

5
km～
～5km

*Used card member data to analyze members by distance

～1km

354m
100％+

～

Approx. 80％
Approx. 90％

Approx. 100％
Analysis of visit times
showed more visits
in evening.
14

Changing Customer Purchasing Patterns(2)Strong sales of daily living categories on stay-at-home demand

Strong-selling Categories (YoY)
DEPT

Paper, femine hygiene, sanitary goods
Frozen foods
Cooking sauces & spices
Convenience food
Alcoholic beverages
Fast food
Desserts
Japanese and Western sweets
Daily goods
Fresh foodFY2020 1H (YoY)+10% or more

+0-9.99%15

FY2020 1H: Daily Sales, Visits, APP (YoY)
Customer visits, which plummeted in April-May,
began to recover from June onwards
JAPAN CVS: EXISTING-STORE SALES (YOY)
Sales
109.7
100.8

102.7

99.6

94.8

98.8

88.5

113.3

89.8

110.0

94.2

Visits
107.3

91.1

APP

105.1
91.3

92.3

2Ｑ

(FY2019)

85.6
80.7

79.2

84.9

86.8

(FY2020)FEBRUARY MARCH

APRIL

MAY

JUNE

JULY

AUGUST*Includes LAWSON STORE 100

16

FY2020 1H: Franchise Store Costs & Profits
Franchise Store Costs (YoY)
Successfully cut three
top costs and other
Reducing
expenses to contributestore costs
to store profits Personnel
 Utilities
 Disposal losses
 Instore supplies

Franchise Store Profits (YoY)
1Q profits down on
lower sales but 2Q
profits up YoY on
successful cost cutting

Securing profits even during COVID-19
helps create lean, efficient store structure17

2H Social Outlook & Operational Climate
HammerSpreading COVID-19 infections■Stay-at-home ■Restricted movement
inside/outside Japan

Dance

With-corona, after-corona

Concern over future
income stream■Invigorated activity■Invigorated consumption

Everyday Demand More visits from nearby
customers
 More demand for evening visits
 Higher demand for daily
essentials

Everyday &Convenience Demand Boost strong areas
 Offer products withstrong value
18

Opportunity for Sweeping Transformation
COVID-19 created fertile ground for convenience stores
to truly support daily living
HammerDance

HammerDance

April-May

June

July

AugustHammerDance
September-

Daily Living+

Infection expands

Number ofState ofemergency
announced

COVID-19

Infection expands

infections

↓

↓

↓

↓

↓

↓

Stay-at-homepractices

More vigorous
activities

Voluntarily restrict
outdoor activity

More vigorous
activities

Voluntarily restrict
outdoor activity

More vigorous
activities

Daily sales (YoY)

Daily living demand Convenience demand Daily living demand Convenience demand Daily living demand Convenience demand
Convenience demand
Daily living demand
Convenience demand
Daily living demand
Convenience demand
Daily living demand

Daily living demand rises
on stay-at-home demand

Convenience demandrises as people’s
activity increases

Repeatedpattern

Convenience
Encourage stores to makeas sweeping atransformation as possible
to ensure they can caterfor both daily living andconvenience demand
under any circumstances.

19

Growing as a Group (1) International Operation
Intend to open more stores on the back ofChinese government plan to double convenience store business(300,000 stores by 2022)

 China
Swift post-COVID 19 recovery resulted in YoY
sales gains in some areas from June. Aim tocapture more demand by strengthening
delivery and use government subsidies togrow operations even with COVID. Expand
new store locations by cultivating mega andarea franchises.
 Expand mega franchises and area
franchises
 Strengthen delivery, introduce more selfservice checkouts
 Use live shopping, etc. to attract more
new customers

20Growing as a Group (2) Entertainment Business
Signs of entertainment operation recovery
United Cinemas

Lawson Entertainment Ticket handling fell sharply but we responded tochanges by strengthening sales of tickets for live
online shows.
 2Q business picked up after event restrictions
eased. 1H operating profit on strong EC sales
and cost-cutting. Aiming for stable operational
management through online-merge-offline(OMO) and digital transformation (DC) initiatives.

 Sales down sharply on temporary closureof movie theaters in April, May. Business
was tough as government restrictedcustomer entry or forced postponement
or cancellation of movie releases, but
August turned a profit on hit products.
 Gradual return as restrictions eased.
Customer Attendance

Mar.

Apr.

May

June

July

Aug.

21

Growing as a Group (3)Seijo Ishii

Financial services

Strive to become a company
that customers trust by
strengthening business modeland improving brand power Strengthen supply infrastructurebuilding and management platform tosupport high-quality store creation.
 Establish and strengthen online sales
and delivery to suit changing customer
behavior towards food.
 Expand and deepen store
footprint in capital cities,build a solid presence inother commercial areas.

Sales

19年度上期 20年度上期

Aim to become the nearest
bank for all customers
 Improve awareness of Lawson
Bank ATMs
 Improve members’ use of
Lawson Ponta Plus credit cardand encourage larger financial
totals.
 Expand cooperation withfinancial institutions offering
cashless payment platforms
and payment operators andextend available functionality
and services.

22Lawson Sweeping Transformation Project
Whole Group to create “Hot Station (Best Relief Hub) in Our
Communities” fit for a new era that transcends current convenience
store formats

Lawson Group Sweeping Transformation
Executive Committee
Launch 11 projects overseen by company president
Company
president
Project
team

Project
team

Projectteam Product development
 Pursue ideal store format
 Utilize Group data
 Reform supply chain Reform job satisfaction...
23

Reference Materials

Copyright (c) 2020 Lawson, Inc. All rights reserved.

Earnings Summary: FY2020 1H Results
FY2020-1H

FY2019-1H
ActualNet sales of convenience store

Actual(Consolidated：Billions of yen)
FY2020Y/Y

Initial plan

1,276.9

1,173.2

91.9%

2,400.0

Operating income

36.7

16.6

45.4%

35.0

Operating income ratio

2.9%

1.4%

- 1.5%P

1.5%

Ordinary income

35.1

14.8

42.3%

30.0

Net income

20.1

3.3

16.4%

5.0

EPS (Yen)

200.9533.05- 167.90

49.96

Total no. of stores in Japan

14,721

14,500-221

14,494

Opening

307

236

-71

400

Closure

245

180

-65

350

Net Increase

62

56

-6

50

Existing store sales (Y/Y)

100.4%

91.0%

-

94.5%

Gross profit at existing stores (Y/Y)

100.8%

88.4%

-

92.7%

Gross profit margin

31.2%

31.2%

+0.0%P

31.3%+0.1%P+0.3%P-+0.2%P(Non-consolidated*)*excluding LAWSON STORE100 business

difference excl. cigarette sales (Y/Y)

Note: Total chain store sales (Net sales of all stores) include sales from the convenience store operation in Japan,
international operations and sales from Seijo Ishii (consolidated items only). Regarding Seijo Ishii,
only the store sales of directly operation are included.
Note: The number of stores is the total number of convenience stores in Japan operated by the Lawson Group.
Note: Net sales at existing stores (YoY) do not include the impact of tickets, etc.
Note: Figures in italic indicate the revised figures from the initial plan.

Copyright (c) 2020 Lawson, Inc. All rights reserved.

25

Key Components of SG&A Expenses(Billions of yen)
FY2019-1H

Y/Y

ActualActual

Y/Y

155.4

154.0

-1.3

Personnel expenses

23.4

22.7

-0.6

IT-related expenses

5.0

6.4

+1.4

7.6

5.2

-2.4

IT-related costs: Increase in depreciation costs for nextgeneration systems, etc.
A&P: Reduction due to review of sales promotion /campaign due to the influence of the COVID-19 infectionand efficiency improvement by digital utilization such as
speed lottery.
Sales commissions:Reduction of the burden on the
franchiser due to reduction of disposal loss of franchisee.

(Hardware leasing, software amortization, maintenance, etc.)

Advertising and promotional expenses
Sales commission

9.6

8.5

-1.1

Facilities expenses

86.2

86.7

+0.5

229.5

217.5

-12.0

Consolidated SG&A expenses

Copyright (c) 2020 Lawson, Inc. All rights reserved.

Consolidated

Non-consolidated＜Major Expenses＞

Non-consolidated

Selling, general & administrative expenses

FY2020-1H

In addition to the above non-consolidated
upward factors, the decrease was due to thetransfer of rent and labor costs of Lawson
stores and movie theaters, which were closed
due to the effects of the COVID-19 infection,
to extraordinary losses.

26

Segment profit(Billions of yen)Segment
Domestic convenience store business

Seijo Ishii businessEntertainment-related business
Financial services business

Actual

13.7

4.8
-1.0
0.7

Y/Y

-15.8

In addition to a decrease in charge income due to a decrease in sales,
profits decreased due to the planned support for low-profit stores fromthe beginning and additional support for franchisee that weresignificantly affected by the COVID-19.

+0.9

Increased demand in supermarkets has led to a significant increase in
fresh food, groceries and alcoholic beverages. Same-store sales
increased significantly due to strong sales of 106.3% year-on-year.

-4.7

Profit decreased due to lower revenues due to the temporary closure ofmovie theaters, as well as lower ticket sales fees due to entertainment
suspensions and restrictions on large-scale events.

-0.5

Profit decreased due to a decrease in the number of ATMs used due to adecrease in the number of customers at LAWSON stores, shortened
business hours and temporary closures of stores.
In China, recovery from the effects of the COVID-19 infection was
relatively quick, and profits improved due to an increase in the numberof stores.

Overseas business

-1.3

+0.3

Other business

-0.2
16.6

-0.2
-20.0

Total
Copyright (c) 2020 Lawson, Inc. All rights reserved.

FY2020-1H
Year-on-year difference factor

27

Consolidated Capital Expenditures & Cash Flows● Consolidated Capital Expenditures

New stores
Existing stores
IT-related
Other
Subtotal for capital expenditure
LeasesDepreciation and amortization● Consolidated Cash Flows（Billions of yen）

（Billions of yen）

FY2019-1H FY2020-1H

FY2019-1H FY2020-1H

Actual
13.4
4.2
6.6
0.6
24.9
25.6
38.4

Copyright (c) 2020 Lawson, Inc. All rights reserved.

Actual
6.2
4.4
4.7
0.2
15.5
12.7
40.5

(Cash dividends paid)

Actual
136.0
-26.2
109.8
-89.5
-12.7

Actual
118.3
-17.7
100.5
-117.1-7.5

Cash and cash deposits

374.1

326.8

Cash flows from operating activities
Cash flows from investing activities

Free cash flows
Cash flows from financing activities

28

Consolidated Balance Sheet at the end of FY2020 1H

Total current assets

As of Feb. As of Aug. Change
28, 2020 31, 2020 from Feb.
- 47.3589.3
636.6

Total current liabilities

As of Feb.
28, 2020
561.9(Billions of yen)
ChangeAs of Aug.
from Feb.
31, 2020
+27.1
589.1

(Cash and deposits)

343.5

326.8

- 16.7(Accounts payable-trade)

129.3

137.3

+7.9

(Accounts receivable)

159.1

150.5

- 8.6

(Short-term loans payable)

39.8

36.3

-3.5

Total noncurrent assets

721.0

705.1

- 15.8(Deposits payable)

193.0

142.1

-50.9

Property, plant and equipment

392.9

384.0

- 8.8

Total noncurrent liabilities

520.4

431.0

-89.4

Intangible assets

97.0

91.5

- 5.4

310.0

230.0

-80.0

(Goodwill)

42.3

40.1

- 2.1

Total liabilities

1,082.3

1,020.1-62.2

Investments and other assets

231.0

229.5

- 1.5

Net Assets

275.3

274.4

-0.9

(Long-terms loans receivable)

42.4

42.5

+0.0

(Common stock)

58.5

58.5

±0.0

(Guatantee deposits)

107.1

104.0

- 3.0

(Retained earnings)

165.0

160.6

-4.4

1,357.7

1,294.5- 63.1

Liabilities and net assets

1,357.7

1,294.5-63.1

Total Assets(Long-term loans payable)

Note: The amount of cash and deposits for financial services business as of August 31, 2020 is 306.5 billions of yen, most of which is used for refilling ATMs.
Note:The amount of loans payable for financial services business as of August 31, 2020 is 108 billions of yen.

Copyright (c) 2020 Lawson, Inc. All rights reserved.

29

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) 2020 Lawson, Inc. All rights reserved.