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.

In Japan-based convenience store business, Lawson opened 554 stores and closed 769 stores in relation to replace low-profit stores, in addition to the expiration of contracts and the relocation of stores. This closure to support franchised stores resulted in a net decrease of 215 stores and a total number of 14,444 stores at the end of February 2020. In China, as a result of the opening of new stores primarily in Shanghai, the number of overseas stores at the end of February 2020 was 2,918, a net increase of 708 stores. As a result, consolidated net sales of convenience stores reached 2,506.9 billion yen (+3.4% year on year) and gross operating revenues expanded to 730.2 billion yen (+4.2% year on year), respectively, exceeding the results of the previous year. In addition, the same-store sales (excluding the impact of tickets and gift card sales etc.) in Japan increased by 0.1% year on year, reflecting our determined development of superior delicious-tasting products in our pillar desserts, bakeries, and bread (sandwiches, etc.) categories, which won the support of a wide range of customers.

On the profit front, one of the management issues faced by franchise stores was an increase in IT system expenses to improve efficiency in store operations and labor savings. However, consolidated operating income was 62.9 billion yen (+3.6% year on year) due to contributions from the Japan based convenience store business, where same store sales growth and gross profit margin improved, the Seijo Ishii Business, where sales of original products are robust, and the Entertainment-related Business, where the movie theater business performed well, etc. On the other hand, consolidated ordinary income was 56.3 billion yen (-2.3% year on year) and consolidated net income was 20.1 billion yen (-21.4% year on year), mainly due to the recording of a loss associated with the closure of low-profit stores as support for franchise stores.

Key Action Planned for FY2020 (year to February 2021)

•We aim to become the Lawson company that all our customers are recommending by strengthening our efforts to achieve three commitments: Superior taste, human friendliness, and environmental (Machi) friendliness.

•Superior taste: Part of our pursuit of great tasting food will involve strengthening measures to enrich everyday life by developing products that satisfy the needs of health-conscious consumers and focusing on three basic health-driven challenges: controlling salt, controlling sugar, and reducing additives.

•Environmental (Machi) friendliness includes efforts to reduce plastic use by switching to paper cups for our coffee services, substituting paper packaging for the plastic containers currently used for our everyday food goods, and reducing the number of single-use plastic bags offered to customers at checkout. Our efforts in FY2019 to proactively reduce food losses and disposal losses helped improve franchise store profits. We intend to continue pursuing these efforts to help protect our environment.

•Human kindness has focused primarily on tackling Japan’s domestic labor shortage. From FY2019, we started offering self-service checkouts that utilize the self-service mode on our new POS cash registers with automatic change dispensers. In addition, as of the end of February 2020, 207 stores had switched to shorter business hours at the request of franchise owner. Furthermore, in addition to the part-time worker dispatch service available to stores in 24 locations to date, we started operating a new system in seven bases nationwide designed to enable franchise owners to take more time off by dispatching head office staff to work in stores. We intend to continue working together with franchise stores to combat tight labor conditions.

•We are determined to build an even stronger partnership with franchise stores by pursuing various short-, medium- and long-term support measures. As part of a fresh initiative to help stabilize franchise store business, we will provide more support to owners looking to operate multiple stores, offer store manager training progress, and introduce ways of helping new franchise store owners.

•In addition to our Japan-based convenience store business, we will aim to grow the whole Lawson Group by further developing our various business interests, including our Seijo Ishii supermarket chain, whose stable growth has contributed considerably to the Group, our entertainment business, our finance-related business that seeks to boost customer convenience by promoting a cashless society, and our international operation that is expanding its reach and working to become a profitable business.

•In December 2019, Lawson signed a capital and business alliance agreement contract with Japanese telecommunications operator KDDI Corporation (KDDI). The agreement is designed to create new consumer experiences by pursuing data marketing that combines the two companies’ customer bases, and exploiting KDDI’s 5G and other state-of-the-art technologies. Going forward, we will be looking to use this joint partnership to provide fresh value through communications, payments, point systems, and brick-and-mortar stores.

Currently, COVID-19 is spreading worldwide and have a major impact on our business environment in Japan and overseas. On April 7, a declaration of emergency was issued to seven prefectures in Japan. Lawson will continue to focus on the stable management of franchised stores and will continue to implement measures to improve the profitability of franchised stores. However, as the Group's business domains are diverse both in Japan and overseas, it is difficult to reasonably estimate its business forecasts at this point in time and the consolidated financial results forecast for FY2020 has not been determined yet.

We will announce it as soon as it is possible to calculate the forecast. The dividend payment for FY2019 remains unchanged from the beginning of the period at 150 yen per share. Although we will announce the dividend estimate for FY2020 at the same time as the full-year forecast, there is no change to the previous dividend policy.

With the spread of the COVID-19, at Lawson, we think about what Lawson can do right now. Accordingly, we distributed rice balls free of charge to after-school facilities nationwide, sold hot milk at half price to support milk consumption and customer health, and offered coloring materials to help children waiting by in their homes.

We continue to aim to become an essential part of local “Machi” communities based on strong partnerships with franchise stores. We would like to ask our shareholders and investors for their continued understanding and support of our management strategies in this endeavor.