During the nine months from March to November 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. However, during that period we stayed 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 nine months of FY2019, Lawson opened 451 stores and closed 466 stores partly in relation to our drive to replace low-profit stores. This resulted in a net decrease of 15 stores and a total number of 14,644 convenience stores in Japan at the end of November 2019. Internationally, we continued our favorable expansion of stores primarily in Shanghai, China, which contributed to a 548 net increase in Lawson’s international network to 2,758 stores at the end of November 2019. As a result of these changes in total store numbers, we were able to successfully generate solid year-on-year gains in both consolidated net sales of convenience stores and gross operating revenue. Consolidated net sales of convenience stores sales reached 1.8995 trillion yen (+3.6% year on year) and gross operating revenue expanded to 550.9 billion yen (+4.4%) over the nine-month period.

In addition, existing-store sales during the first nine months of FY2019 in Japan (excluding ticket and gift-card sales etc.) increased by 0.2% year on year following our determined development of superior delicious-tasting products in our pillar dessert, bakery, and bread (sandwiches, etc.) categories, which won the support of a wide range of customers.

On the profit front, consolidated operating income in the first nine months of FY2019 expanded by 9.0% to 52.1 billion yen thanks in part to our Seijo Ishii upmarket supermarket business, which reported strong sales of original delicatessen items, and our strong cinema operation and other entertainment-related businesses. While we recorded some losses relating to the closure of low-profit stores, consolidated ordinary income rose by 4.3% to 48.6 billion yen, and consolidated net income increased by 2.5% to 25.9 billion yen.

Key Actions Taken in the Third Quarter of FY2019

•Product development: In the dessert category, our nouvelle sweets continued to be well received, such as our hit “BASCHEE” Basque-style burnt cheesecake, which was first launched in March. Sales rose strongly year on year thanks to our popular Uchi Café desserts, including our new CUPKE series—authentic cakes in a cup that went on sale in October. In the bakery category, sales of our renewed delicatessen bread items increased, and a string of new products in our “Machi-no-pan” series proved popular. In the bread (sandwiches, etc.) category, sales rose as our new sandwich series with tasty fillings launched in September attracted new buyers, and our mixed sandwiches, egg sandwiches, and other renewed existing items proved successful.

•As part of our initiative to reduce plastic use, we changed the packaging for all our triangular-shaped sandwiches to a simple design and reduced the volume of plastic used in each package by approximately 0.3g. As part of our efforts to reduce food disposal losses, we successfully reduced the volume of waste from readymade meals by approximately 10% year on year by extending sales permissions, and encouraging instore discounts and ways of ensuring all fried food sells out.

•To help address Japan’s increasing severe labor shortage, we continue to pursue ways to increase customer convenience and store productivity. We started introducing self-service fried food counters, etc. in all new stores from September onwards. In November, we started investigating each of our stores in turn to determine the advantages and disadvantages of introducing self-checkouts, which use the self-mode function on the POS cash registers with automatic change-dispensers introduced into all stores by the end of FY2018. We then started gradually offering the self-checkout facility where appropriate.

•We started returning 2% of the purchase price to customers using cashless payment methods in Lawson stores as part of the Japanese government’s subsidy operations following the October 1 sales tax increase. We are also working to increase the number of members and sales purchased using Lawson Bank’s “Lawson Ponta Plus” credit card.

In April 2019, Lawson announced its action plan and started implementing various measures to strengthen franchise-store support and generally deepen our relationship with our franchise-store partners. This involves using digital technology to improve store operations by introducing new store computers and self-checkout registers. We are also working to directly address and solve franchise store issues, including the possibility of shorter business hours, by proactively discussing potential countermeasures with franchise store owners. As of the end of December 2019, 155 stores had switched to shorter business hours at the request of the franchise owner. We are also working to improve franchise store profits by helping reduce food waste. We continue to aim to become an essential part of local “Machi” communities based on strong partnerships with franchise stores.

In December 2019, we signed a joint business agreement with Japanese telecommunications operator KDDI Corporation to promote data marketing using both companies’ strong customer bases, and use cutting-edge technology to create new consumer experiences. We also agreed on an initiative to create a new consumer experience together with KDDI, Mitsubishi Corporation and Loyalty Marketing, Inc. by fusing online and instore shopping. We will strive to create new value by tying up with each of these companies on communications, settlements, reward points, and physical store links.

In the fourth quarter of FY2019 from December 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-checkout operations. Over the full business year, we will continue to invest in franchise store support measures in order to build a solid framework to support future growth and confirm our market position. We will also continue replacing low-profit stores. In light of these initiatives, our profit expectations remain unchanged and we maintain our forecast for a flat year-on-year consolidated operating income of 60.8 billion yen in FY2019. I would like to thank all our stakeholders for their continued understanding and support of our long-term strategy and future business direction.