During the six months from March to August 2018, Lawson, Inc. has pursued business activities that give concrete shape to our corporate philosophy; “Creating Happiness and Harmony in Our Communities”.

FY2018 marks the third and final year of our “1000-Day Action Plan” project, so we spent the first half continuing to formulate a next-generation Lawson convenience-store model to ensure sustainable growth, and reform our chain-store management with such measures as changing product order cut-off and store delivery times to provide stronger support for everyday living, especially evening and nighttime convenience-store demand.

Looking at store numbers, the Lawson Group opened 525 stores and closed 177 stores in the first half, resulting in a net increase of 348 stores and a total number of 14,340 convenience stores in Japan at the end of August 2018. Store numbers outside Japan increased by a net 296 to 1,892 stores at the end of August 2018, due largely to an expansion of store numbers in China. In June, the network in Shanghai, Jiangsu, and Zhejiang surpassed the significant 1,000 store milestone. These net store increases helped generate year-on-year gains in both consolidated chain-store sales and operating revenue, with consolidated chain-store sales reaching 1.2245 trillion yen (+6.6%) and operating revenue expanding to 351.9 billion yen (+6.9%) in the first half of FY2018.

However, first-half existing-store sales in Japan (excluding ticket and gift-card sales etc.) declined by a marginal 0.8% year on year on the back of increasingly severe competition from inside and outside the convenience-store industry, and unseasonal weather such as the unprecedented heavy rains in Western Japan in July. On the profit front, business expenses rose as we increased leading investment in new operations and next-generation systems in order to secure sustainable growth, and we also increased advertising to help strengthen evening and nighttime food ranges and shouldered a greater portion of franchisee disposal losses. As a result, first-half operating profit declined year on year to 34.4 billion yen. That figure was higher than originally expected however due to active business expense reductions in systems costs and other areas, and our decision to delay scheduled sales promotion activities until the second half of the fiscal year.

Key Actions Taken in the First Half of FY2018

・Rice related products and noodle categories: Our efforts to ensure higher-quality manufacturing processes and ingredients for our onigiri rice balls, which were renewed in April, were well received by customers and resulted in another year-on-year sales increase. Boxed lunches and noodles in our More Vegetables! series sold well as the series became increasingly popular with customers who want to consume more vegetables.

・In the over-the-counter fast food category, sales of our long-term strong-selling Karaage-kun fried chicken range topped 3.0 billion units in July. Our decision to mark the occasion with TV ads and a Plus-1 sale secured the range’s continued popularity and strong sales. We also strengthened our range of delicatessen items on offer during the evening and nighttime periods by renewing our Genkotsu potato croquettes and Genkotsu mince croquettes, announcing Okazu potato croquettes and Okazu mince croquettes (new evening meals), and expanding the display of pre-packed items designed to be eaten at the evening meal.

・In the dessert category, in June we launched the first product made under a “Japanese harmony” theme, the Soft Chocolate Fortune Bun, to mark the start of our Uchi Cafe SWEETSxGODIVA collaborative series with the exclusive GODIVA confectionery manufacturer. The first week anniversary of the series was then celebrated with the arrival of the “Chocolate Roll Cake”, which has proved popular mainly with female customers. We also launched the” UchiCafe x GODIVA Etoile du Chocolat (the Chocolate Star)”, inspired by the July Tanabata meeting of stars festival, as the first product in our Saiji Sweets range, which seeks to express seasonal Japanese events and words through confectionery.

・To show our strong support for working women, in August, we expanded our Lawson Fresh Pick service to approximately 700 metropolitan Lawson stores. This service enables customers to order fresh produce and meal kits via smart phone in the morning and pick up their order from a Lawson store in the evening. The service has proved extremely popular, and we are currently planning to extend coverage to approximately 2,000 urban stores by the end of FY2018.

・Lawson began introducing new POS cash registers with automatic change dispensers in earnest in June to improve in-store cash management. By the end of August 2018, we had installed the new registers in 4,500 stores, and are planning to complete network-wide installations by the end of FY2018. This move, along with the last year’s introduction of tablet devices, is designed to boost store efficiency and improve productivity in times of increasingly tight labor resources.

・Lawson Bank, Inc. received its banking operation license from Japan’s Financial Services Agency on August 10. The bank opened for business on September 10, and is set to start offering banking services to customers from October 15. Initial offerings will include services designed to further boost the convenience of our pillar ATM operation. We will also start offering retail banking services, such as deposits, credit cards and internet banking. Going forward, the Lawson Group intends to offer financial services that are essential to community living by increasing the broad range of possible financial services available through Lawson Bank.

In the second half of FY2018, we have been working to strengthen support offered to franchise stores, and also strengthen the appeal of our products, our store displays and our new store openings to ensure we remain an essential part of our communities. We have labeled FY2018 the “founding year of superior evening and nighttime convenience store service” and, to that aim, since June we have been working on ways to adjust product order cut-off and delivery times to ensure an ampler display of products, so we can better serve evening and nighttime customer demand. Overall, we are looking to create store displays that offer plentiful, attractive products not only in the mornings and at lunchtimes, but in the evening and nighttime as well. We are also still working towards achieving our full-year operating profit target, which remains unchanged at 60.0 billion yen.

We have determined that the business year through February 2019 will be a period for investing in our future, and consolidated operating profit is expected to decline as a result. However, we are committed to actively pursuing positive measures to establish a solid operational base that can support future sustainable growth, such as building next-generation systems to improve productivity, and pursuing new initiatives and services for our finance operation. I call on all our shareholders and investors to support us in this forward-looking, long-term management strategy.