During the six months from March to August 2019, Lawson, Inc. has pursued business activities that give concrete shape to our corporate philosophy; “Creating Happiness and Harmony in Our Communities”. Our current corporate environment is growing increasingly severe as Japan’s shrinking working-age population results in an ever tighter labor supply and a sharp increase in personnel costs. Against that background, we are firmly focused on pursuing sustainable growth together with our franchise partners by further strengthening franchise-store support mechanisms and our broader joint relationships.

Regarding store numbers in the first half of FY2019, Lawson opened 307 stores and closed 245 stores, resulting in a net increase of 62 stores and a total number of 14,721 convenience stores in Japan at the end of August 2019. Internationally, we continued our favorable expansion of stores primarily in Shanghai, China, which contributed to a net increase in Lawson’s international network of 337 to 2,547 stores at the end of August 2019. The net increase in store numbers inside and outside Japan helped generate year-on-year gains in both consolidated net sales of convenience stores and gross operating revenue, with consolidated net sales of convenience stores sales reaching 1.2769 trillion yen (+4.3% year on year) and gross operating revenue expanding to 369.1 billion yen (+4.9%) in the first half.

In addition, first-half existing-store sales in Japan (excluding ticket and gift-card sales etc.) increased by 0.4% thanks to a successful strategy to strengthen evening and nighttime product ranges, and our determined development of superior delicious-tasting products in our pillar dessert, bakery, and rice ball categories, which won the support of a wide range of customers.

On the profit front, first-half consolidated operating income expanded by 6.6% to 36.7 billion yen, consolidated ordinary income rose by 4.8% to 35.1 billion yen, and consolidated net income increased by an impressive 12.1% to 20.1 billion yen. Our Seijo Ishii upmarket supermarket business, which reported strong sales of original delicatessen items, and our Entertainment-related business, which handled a number of large-scale events throughout the six-month period, contributed considerably to our first-half profit performance.

Key Actions Taken in the First Half (March-to-August 2019) of FY2019

•Product development: In the rice category, our “Kinshari (= high rank rice)” rice ball series, first launched in April, continued to generate strong sales, while the addition of a new-flavored “Akuma-no-onigiri (= rice ball too delicious to stop eating)” further contribute to this series’ broad popularity and consistently strong sales. In the dessert category, our hit “BASCHEE” Basque-style burnt cheesecake, first launched in March, continued to prove popular, so we started selling a new Premium BASCHEE in August, which has also won strong customer support. In the bakery category, continued strong sales of “Machi-no-pan”, our new bakery series and a successful renewal of existing staple items both contributed to rising sales.

•Addressing Japan’s increasing severe labor shortage: We continued to pursue labor- and personnel-saving initiatives for franchise store operations. In July, we trialed self-checkouts using the self-mode function on our POS cash registers with automatic change-dispensers, which were fully introduced into all stores by the end of FY2018. We intend to start operating these self-checkouts from November 2019. Furthermore, in August, we also started experimenting with smart stores as a nighttime personnel-saving measure. The stores are unmanned during nighttime hours, and customers are required to register their purchases themselves using self-checkout. We will consider whether to expand this trial going forward after investigating any issues relating to store operations, security, or distribution, as well as sales level, and customer reaction.

•Initiatives to promote Sustainable Development Goals (SDGs): We are working to reduce the amount of plastic used in our product packaging through initiatives such as the gradual switch from plastic to paper cups for our S-size iced coffee drink. In August, we started to offer surplus food from our distribution center that was destined for disposal to facilities requiring food support and other venues via the Food Bank All Japan general incorporated association. Lawson remains committed to further reducing plastic usage and food waste across its entire supply chain.

•In April 2019, Lawson announced its action plan and started implementing various measures designed to strengthen franchise-store support and generally deepen our relationship with our franchise-store partners. Then in July, we established one in-house and one external advice line exclusively for franchise owners to help further strengthen communication. Specialist staff handle any franchise owner contact directed to the internal advice line, while the external advice line is serviced through a dedicated link to a law firm, in order to advise on overall store management.

In the second half of FY2019 from September 2019 through end February 2020, we will be looking to further progress our labor- and personnel-saving measures for store operations, including expansion of self-checkouts operation. To help counteract the October 1 increase in Japan’s consumption tax, we will be working to expand sales and increase membership by offering additional points to Lawson Bank’s “Lawson Ponta Plus” credit card holders.

Over the full business year, we will continue to build a solid framework to support future growth, confirm our market position, and address Japan’s tight labor market conditions. Specific measures will include boosting the efficiency of store operations, increasing energy-saving investment, and replacing low-profit stores. As a result of these actions, we forecast full-year consolidated operating profit will remain flat in FY2019 at 60.8 billion yen. I ask for the kind understanding and support of all our stakeholders in this drive to secure sustainable long-term business growth.