Summary of Results for FY2012

Lawson, Inc.
April 11, 2013

Copyright (c) 2013 Lawson, Inc. All rights reserved.

1

Financial Results for FY2012

Katsuyuki Imada
Chief Financial Officer

Copyright (c) 2013 Lawson, Inc. All rights reserved.

2

FY2012 Earnings Summary(Consolidated：Billions of yen)

Net sales of all stores
Operating profit
Operating profit ratio
Recurring profit
Net profit
EPS (Yen)
Dividend per share (Yen)ROE
Total no. of stores in Japan

FY2010
Actual
1,682.8
55.5
3.3%
54.5
25.3
254.61
170
12.8%
9,994

FY2011
Actual
1,825.8
61.7
3.4%
61.7
24.8
249.17180
12.0%
10,457

Actual
1,906.5
66.2
3.5%
65.9
33.1
332.20200
15.2%
11,130FY2012
YoY
104.4%
107.2%+0.1%P
106.8%
133.3%
133.3%+20+3.2%P+673

vs. Plan
97.8%
100.4%+0.1%P
101.3%
99.3%
99.3%▲0.1%P+83

Note: Change vs. the plan indicates comparison with the plan announced at the second quarter of FY2012.

 Consolidated operating profit exceeded the plan by 0.2 billion yen, and increased by 7.2% yoy.
Expanded sales of over-the-counter fast foods and better markup for beverage and processed foods raised grossprofit margin.

 Consolidated net profit was less than the target by approx. 0.2 billion yen but greatly exceeded yoy by 33.3%.
In addition to increasing operating profit, extraordinary loss decreased in the absence of asset retirement obligations
which was accompanied by accounting system change and loss due to the disaster in FY2011.
Copyright (c) 2013 Lawson, Inc. All rights reserved.

3

Existing Stores (Non-Consolidated)
110.0%

1.5%<FY2012>Gross profit:101.2%

105.0%

1.0%
0.5%

100.0%

0.0%
Existing store sales:100.0%(number of customers 99.4%,
spending per customer 100.6%)

95.0%
90.0%

-0.5%
-1.0%
-1.5%

1H

2H

1H

FY20092H
FY2010Gross profit margin difference (YoY, Right）
Existing stores gross profit（YoY, Left)

1H

2H
FY2011

1H

2H
FY2012Gross profit margin difference, excl. cigarette sales (YoY, Right）

Existing stores sales（YoY, Left）

 Existing store sales stayed 100% yoy despite a drop in cigarette sales (decrease approx. 1.0 percentage
points), thanks to strong sales of over-the-counter fast foods with higher gross profit margin as well as
delicatessen items and perishable foods enhanced to expand the customer base for women and seniors.
 Overall gross profit margin increased by 0.4pp yoy thanks to favorable sales in over-the-counter fast foods,
processed foods and soft drinks. Excluding cigarettes, it reached 0.5pp increase yoy.

 As a result, existing store gross profit amounted to 101.2% yoy, exceeding the previous year.
Copyright (c) 2013 Lawson, Inc. All rights reserved.

4

Store Opening (Non-Consolidated)
Net store increase （Left）
Store opening (Left)Store Closure （Left）
Daily sales per new store （Right）(Opening, Closure, Net store increase)(Daily sales per new store: Thousands of yen)

860

900

600
614

600

480

300

360

0

240

-300

246

-600

120
0

FY2009FY2010FY2011FY2012

 Store opening proceeded basically as planed. (Net increase in stores and store opening in FY2012 includes
approximately 120 stores in CVS Bay Area with renovated signs.)
 64 less stores closed than planned thanks to leveraging the improvement of franchise owners' profitability as
well as expansion of MO (Management Owner) system.
 Daily sales per new store decreased slightly yoy.

 Plan for FY2013 (Non-consolidated): 800 new openings, 400 closures to bring 400 net increase in stores.
Copyright (c) 2013 Lawson, Inc. All rights reserved.

5Key Components of SG&A Expenses

Non-consolidated

FY2012FY2011FY2013(Billions of yen)
Actual Actual Change
Forecast
Selling, general & administrative expenses188.1
198.7 +10.5 Increase 5-10%＜Major Strategic Expenses＞
Personnel expenses
35.8
34.9 ▲ 0.9
IT-related expenses
15.7
15.1 ▲ 0.6(Hardware leasing, software amortization, maintenance, etc.)
Advertising and promotional expenses
11.1
10.6 ▲ 0.4

Consolidated SG&A expenses

260.9

276.3

Increase 10-15%
Increase 5-10%

Compared to Plan

Compared to Fiscal 2011
Non-consolidated

 Advertising and promotional expenses were raised byaccepting co-sponsorship with SCI, our SCM-specialized
subsidiary. (excl. this co-sponsorship, it increased
substantially +16% yoy) Net increase in stores as well as store remodelingexpense, etc. also raised the expenses.

Non-consolidated

Consolidated Enhancement of ticket sales of Lawson HMVEntertainment raised the expenses for advertisement andpromotions.
 Shanghai Hualian Lawson which was turned into a
consolidated subsidiary in 4Q in FY2011 contributed forthe significant increase from the previous year.

Consolidated

Copyright (c) 2013 Lawson, Inc. All rights reserved.

+15.3

Increase 0-5%
Increase 10-15%

2.5 billion yen less than planned Advertising and promotional expenses wereraised due to co-sponsorship with SCI, as
mentioned on the left.

2.6 billion yen less than planned
 Less openings overseas and decrease inpersonnel expenses
 Cost reduction and less new store openings ofNinety-nine Plus contributed to the decrease.
6

Earnings of Major Subsidiaries(Billions of yen)

＜Operating Profit of Major Subsidiaries＞

FY2012

FY-end Ownership

Actual100.0%
100.0%
100.0%
85.0%
76.5%
51.0%

2.08
2.44
▲ 0.67▲ 0.574.75▲ 0.27

Ninety-nine Plus, Inc.
Feb.
Lawson HMV Entertainment, Inc. Feb.
Chongqing Lawson, Inc.
Dec.
Shanghai Hualian Lawson, Inc. Dec.
Lawson ATM Networks, Inc.
Feb.
Smart Kitchen, Inc.
Feb.

FY2013
YoY change Forecast

+0.20
+0.79
▲ 0.42▲ 0.29+1.11▲ 0.272.90
2.80▲ 0.80▲ 1.105.40▲ 1.10Ninety-nine Plus, Inc.

Operating profit grew thanks to growth of gross profit margin and reduction of cost.
Steady progress in conversion to franchise stores are in progress.

Lawson HMV Entertainment, Inc.

Achieved profit increase with favorable ticket sales including big events thanks toenhancement in the entertainment business.

Subsidiaries in China

Profit decrease was due to China's unfavorable economic climate as well as upfront
investments for building consumer recognition.

Lawson ATM Networks, Inc.
Copyright (c) 2013 Lawson, Inc. All rights reserved.

Profit increased due to increased number of transactions and ATM installation in line withnet growth in number of stores. Cost control also contributed.
7

Cash Flows and Capital Expenditures (Consolidated)
 Consolidated Capital Expenditures

New stores
Existing stores
IT-related
Other
Subtotal for capital expenditures
Depreciation and amortization

Consolidated Cash flows
Cash flows from operating activities
Cash flows from investing activities

Free cash flows
Cash flows from financing activities(Cash dividends paid)
Cash and cash equivalents at end of period（Billions of yen）

FY2010
Actual
13.6
8.9
7.4
1.0
31.0
33.0

FY2011
Actual
21.5
10.2
7.7
0.6
40.2
37.8

FY2012
Actual
33.1
8.7
5.9
3.2
51.0
43.8

FY2013
Plan
33.5
15.0
7.5
5.0
61.0
49.8

FY2010
Actual72.2▲ 30.541.6▲ 28.7▲ 16.4FY2011
Actual86.3▲ 52.933.4▲ 27.5▲ 17.1FY2012
Actual85.1▲ 54.130.9▲ 31.9▲ 19.2FY2013
Forecast
Approx. 85.0
Approx. ▲65.0
Approx. 20.0
Approx. ▲35.0▲ 20.5

67.7

73.6

72.7

-

Cash flows from investing activities increased in FY2013
because of enhancement of existing stores.
Copyright (c) 2013 Lawson, Inc. All rights reserved.

8

FY2013 Company Forecast (Consolidated)
Net sales of all stores
Operating profit
Operating profit ratio
Recurring profit
Net profit
EPS（Yen）
Dividend per share (Yen)ROE

Actual
1,825.8
61.7
3.4%
61.7
24.8
249.17180
12.0%

Actual
1,906.5
66.2
3.5%
65.9
33.1
332.20
200
15.2%

Plan
2,022.0
70.0
3.5%
68.4
35.9
359.38
210
15.3%

YoY
106.1%
105.7%
0.0%P
103.8%
108.2%
108.2%+10+0.1%P

Total no. of stores in Japan

10,457

11,13011,550+420

104.0%
105.4%
30.1%+0.5%P

101.2%
100.0%
30.5%+0.5%P

101.5%
100.0%
31.0%+0.5%P+0.3%P
0.0%P+0.5%P
0.0%P(Billions of yen)(Non-consolidated)

Gross profit at existing stores (YoY)
Net sales at existing stores (YoY)
Gross profit margin ratio
Gross profit margin difference excl. cigarette sales (YoY) For 11 consecutive years we have continuously grown operating profit and in FY2013, we plan to continue
growth in overall convenience store business in Japan despite upfront investments in overseas operation andhome convenience business.
 ROE target in FY2013 is 15.3%.
Copyright (c) 2013 Lawson, Inc. All rights reserved.

9

Operating Strategy of Lawson
Genichi Tamatsuka
Chief Operating Officer

Copyright (c) 2013 Lawson, Inc. All rights reserved.

10Topics
 Expanding customer base - action and progressFresh food-type convenience store
MACHI café

 Enhance Customer Relationship Management (CRM)
and Supply Chain Management (SCM)

Loyalty program, Ponta card data utilization
SCM reform Progress for improvement of gross profit margin
 Investments in overseas operation

Copyright (c) 2013 Lawson, Inc. All rights reserved.

11

Enhance Image of LAWSON as Fresh food-type CVS
Growth in fresh food-type stores(Number of stores)
9,000
8,000

(Target)

8,400

LAWSON STORE100
Fresh food-type LAWSON

6,511

7,000
6,000
5,000
4,000

Accumulated
expertise ofhandling fresh food
CVS since 2005,
ahead of allcompetitors

3,000

1,223

1,076

1,000

996
227

1,186

Feb. 2009

Feb. 2010

1,224

1,172

2,262

2,000

0

5,085

5,287
3,913

Feb. 2011

Feb. 2012

Feb. 2013 (Target)

Note: The number of LAWSON STORE100 stores includes the former SHOP99 stores. The number of fresh food-type LAWSON stores at the end of fiscal
2011 includes those with three rows of shelves in addition to the former hybrid type (with one line of gondola shelving.)

A year-on-year increase for fresh food-type CVS exceeded 1,400 in FY2012
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12

Attract More Customers
Ratio of senior customers in FY2012(based on average purchase amount by store)
35.0%
30.0%
25.0%
20.0%
15.0%

(n=4,388)
24.1%(n=589)
25.0%

4.9%

5.5%

19.1%

19.6%

(n=678)26.1%(n=1,997)
27.2%(n=599)
28.8%

8.2%

(n=28)
30.2%

9.4%

aged
65-90 yrs

5.7%

6.6%

20.3%

20.5%

20.6%

20.9%

1yr to 2yrs

2yr to 3yrs

3yrs and over

10.0%
Nonremodeled
storesRemodeled in Less than 1yr
2H of FY2012

aged
50-64 yrs

Fresh food-type stores (since remodeling)
Note: Based on the percentage of seniors in Ponta card customers' purchase amount, the total amount of purchase at 8,775 stores which existed
as of Feb. 2012.)

Steadily expanding customer baseafter remodeling to fresh-foods type convenience stores
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13

Respond to Customers' Potential Needs
Customers buying perishable foods vs. Not buying perishable foods(Spending per customer)

781 yen. times
spending
per customer

1
2

644 yen
Customers notbuying perishable foods

Customers buying
perishable foods
5,971 yen spent /month

2,408 yen spent /month

7.7visits/ month

3.7visits/month(Frequency of visit)

2.1 times visits
Period: Feb 1- Feb. 28, 2013 / Area: North Kanto / Sampled: 117 stores

Customers buying perishable foods turned out to be loyal customers –they spend 2.5 times more.
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14

MACHI café as Hospitality Tool for Customers
Growth in MACHI café installed stores(Number of stores)
6,000

5,000
(Plan)
5,000

4,000

2,860

3,000

Improve store
quality to expand
installationof MACHI café

1,679

2,000

740

1,000

324
0
Nov. 2011

Feb. 2012

Aug. 2012

Feb. 2013

Feb. 2014 (Plan)

Only stores meeting our quality standards have been installed
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15

Case of Nagano BranchOver-the-counter fast foods (except MACHI café) sales yoy
and MACHI café installation rate
MACHI café precedent installation
started in Nagano Branch

NaganoBranchJune 2011

August 2011

February 2012

August 2012

February 2013

102.1%

115.0%

101.3%

116.8%

116.4%

52%

57%

59%

65%

119.7%

104.3%

102.6%

103.8%

1%

8%

17%

27%

Ratio of MACHI café
installation

National
Average

112.1%
Ratio of MACHI café
installation

Note: Daily sales yoy of over -the-counter fast food items (excl. MACHI café)

Recognition and familiarity of MACHI café in the commercial area
ushered in expansion of other OTC fast foods sales.
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16

Ponta Card Data Utilization - From Segment to Individual(Ratio of Ponta card
members in sales)

Ratio of Ponta card
members in sales

Individual store reporton its Ponta card members

52 million
60.0%(FY2012)

45%

50.0%

41%
40.0%

33%
30.0%

40 million(FY2011)24%

30 million(FY2010)20.0%

20 million
10.0%

Each store responds
to its customers'
needs and preference
based on Ponta card
data utilization.

(FY2009)

0.0%
Feb. 2010 Feb. 2011 Feb. 2012 Feb. 2013

Store operation from seat-of-the-pants approachto data-driven analytical approach
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17

Role of SCI, Subsidiary of Supply Chain Management
Innovation with Advanced SCM (since FY2012)
R&D

Procurement

Manufacture

Ponta card Pursue More effective
data analysis
procurement

Distribu
tion

Improve productivity in outsourced
manufacture/distribution (cost visualization)

Sales
PRiSM

SCI
Food
Suppliera subsidiary specialized in
SCM innovation &enhancement

Enhance valueadded raw material
procurement

More effective
distribution

Venderor Factory

Distribution
CenterStore

Direct sales toexternal companies

Optimize value chain to become a manufacturing retailer
Copyright (c) 2013 Lawson, Inc. All rights reserved.

18

Targeting 4 pp Growth in Gross Profit Margin
Gross Profit Margin Excluding Cigarettes(%)+0.5%P

39.0+0.5%P

37.0

35.0
2006

2007

2008

2009

2010

2011

2012

2013 (FY)(Plan)

Continuous improvement in gross profit margin
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19

Upfront Investments in Overseas Operation
 Business in China
 Shanghai: Enhance existing stores than expand considering worsening
economic climate
 Chongqing & Dalian: Build recognition of LAWSON for future market growth Business in other Asian countries Unfold in collaboration with major local retailers, Alpha Group in Indonesia
and SAHA Group in Thailand
DalianMake a difference responding to
specific local needs by utilizing
convenience store formats

Japan

Chongqing
Shanghai
HawaiiThailandIndonesia
Copyright (c) 2013 Lawson, Inc. All rights reserved.

20

Process ofCorporate Value Creation
Takeshi Niinami
President & CEO

Copyright (c) 2013 Lawson, Inc. All rights reserved.

21

Topics
 Investment for sustainable growthEnhance individual store’s competitivenessUpfront investments for sustainable growth–Future vision of home convenience business Return to shareholders
Emphasis on TSR (Total Shareholder Return)Continuous dividend growthOptimal allocation of cash flow for ROE growth cycle

 Roadmap for medium-term sustainable growth and
20% ROE target

Copyright (c) 2013 Lawson, Inc. All rights reserved.

22

Enhance Individual Store’s Competitiveness(Number of stores)

Three major CVS companies
net increase in stores and operating profit
(%)

1,200

160

1,000

140

800

120

600

100

400

80

200

60

0

40
2005

2006

2007

Store Net Increase-Law
OP Growth-Law

2008

2009

Store Net Increase-A
OP Growth-A

2010

2011

2012

(FY)

Store Net Increase-B
OP Growth-B

Note: The values are calculated based on the summary of financial results of each company.
Operating profit growth indicates the change from operating profit of FY2005.

Operating profit growth has derived from existing store performance
rather than the increased number of new openings
Copyright (c) 2013 Lawson, Inc. All rights reserved.

23

Upfront Investments for Sustainable Growth
1. Enhance individual store’s competitiveness against
competitors’ aggressive store openingEnrich the lineup with over-the-counterfast foods for expanding customer base-

MACHI café
On-site cooking

Solar power on the store’s roof

2. Upfront investment for mid-/long-term growthOverseas operation

Home convenience business

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24

Home Convenience BusinessSupport consumer’s quality
vegetable intake &shortening cooking time

Smart Kitchen Distribution Center
Radishbo-ya

DAICHI WO
MAMORU KAI

LawsonDry Distribution Center /Chilled Distribution Center /Frozen Distribution Center
Note: Home convenience business provides convenience of shopping for everything at home utilizing PCs, smartphones and tablet PC.

We aim to realize a higher level of interplay of convenience between brickand-mortar stores and home delivery service by utilizing Ponta cards.
Copyright (c) 2013 Lawson, Inc. All rights reserved.

25

Focus on Total Shareholder Return (TSR)
(%)

100
90
80
70
60
50
40
30
20
10
0

Total Shareholder Return (TSR) of past 3 years*
91.5

45.1
14.9

LawsonAverage of two major
competitors

Tokyo Stock Exchange 1st
SectionNotes: Three-year TSR is a provisional calculation of total return of a stock (capital gain plus dividends) over three years from February 2010 to February 2013.
Average of two major competitors is a simple average of Seven & i Holdings and FamilyMart (Company estimates)

Realize high TSR is a sustaining operating profit growth
and aggressive dividend increase
Copyright (c) 2013 Lawson, Inc. All rights reserved.

26

Continuous Dividend Growth
Changes in annual dividends per share and dividend yield
(yen)

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

210yen 5.0%
200yenDPS（left）
Dividend Yield(right)

2.9%

2.4%
Top 20 global retailers’
average dividend yield*
FY2001 FY02

FY03

FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

4.5%
4.0%
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%

FY13
(Forecast)* Top 20 retailers of total market value excl. apparel retailers

Continuous return execution independent of temporal ups and downs
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27

ROE Growth Cycle through Optimal Cash Flow Allocation
ROE
（％）

20.0
15.0

15.3％

10.0

(FY2013 target）

5.0
0.0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 (FY)

Emphasis on ROI for optimal reinvestments based on economic rationality⇒ Increase operating cash flow ⇒ Create free cash flow after reinvestments⇒ Better shareholder return (dividend increase)（年度）⇒ Realize sustainable growth
Copyright (c) 2013 Lawson, Inc. All rights reserved.

28

Roadmap to Medium-term Continuous Growth and ROE 20%

Consolidated
operating profit
100 billion yen

ROE 20%
Dividend increase/share buy-back andcancellation

Short-term

Grossoperating profit

Non-consolidated
LawsonIncrease grossprofit margin by 4pp

Medium- /long-term
Consolidated
subsidiaries
・Home Convenience
Business・Overseas BusinessSelling,
general andadministrative
expenses

Existing stores'
gross profit

Net increasein stores
500 stores per year

Industry
consolidation

Triggers for the roadmap to ROE 20% and 100 billion Yen in consolidated
operating profit
Investments complying with ROIC criteria for better capital efficiency
 Improve differentiated products, CRM (Customer Relationship Management) via Ponta card andAdvanced SCM reform for better gross profit margin
 Lead industry consolidation utilizing past M&A expertise
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29

Reference

Copyright (c) 2013 Lawson, Inc. All rights reserved.

30

Half Year Breakdown of FY2013 Forecast
FY2013 Forecast(Consolidated: Billions of yen)

Net sales of all stores

1st Half

2nd Half

Full year

1,025.0995.0

2,020.0

Operating profit

35.5

34.5

70.0

Operating profit ratio

3.5%

3.5%

3.5%

Recurring profit

34.6

33.8

68.4

Net profit

17.3

18.6

35.9

Gross profit at existing stores (YoY)

101.5%

101.5%

101.5%Net sales at existing stores (YoY)

100.0%

100.0%

100.0%

Gross profit margin ratio

30.9%

31.1%

31.0%

(Non-consolidated)

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31

FY2012 Consolidated Balance Sheet(Billions of yen)
As of Feb. 28, Change from2013
Feb. 29, 2012

As of Feb. 28, Change from2013
Feb. 29, 2012

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

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

Total Assets

180.2
84.7
46.0
399.5
209.1
34.0
156.2
34.5
86.1
579.8

Copyright (c) 2013 Lawson, Inc. All rights reserved.

20.1
5.6
▲ 4.9
13.3
28.2
25.3
▲ 4.8
7.8
2.4
2.4
48.3

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

Net Assets(Common stock)(Retained earnings)

Liabilities and net assets

239.7
87.1
87.5
109.8
34.8
230.1
58.5
121.1
579.8

21.8
▲ 1.0
12.5
11.0
▲ 0.9
15.5
13.9
48.3

32

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) 2013 Lawson, Inc. All rights reserved.

33