During the three months from March to May 2020, Lawson, Inc. has pursued business activities that give concrete shape to our corporate philosophy; “Creating Happiness and Harmony in Our Communities”. The COVID-19 virus continued to spread globally in the first quarter, resulting in a declaration of a state of emergency in Japan from April into May, the subsequent temporary closure of various facilities, and voluntary stay-at-home practices, all of which exerted an enormous negative impact on economic and social activities and people’s daily lives. Against that background, Lawson is always thinking about what it can do, including how prevent the spread of the infection to our customers and all our employees, and how to conduct our business in a way that responds flexibly to dramatically changing customer needs.

At our Japan convenience store business, while the expansion in teleworking and stay-at-home practices caused by the spread of COVID-19 boosted customer visits to stores in residential locations at daytime, it also reduced customers numbers in business, shopping and other locations, resulting in a dramatic decline in overall sales in the March-to-May quarter.

Looking at store numbers, in the first quarter, Lawson opened 129 stores and closed 104 stores resulting in a net increase of 25 stores and a total number of 14,469 convenience stores in Japan at the end of May 2020. Internationally, we pressed ahead with our policy to close stores exhibiting low profitability, resulting in a net decrease of 13 stores and a total of 2,905 international stores at the end of May 2020. As a result, both consolidated chain-store sales and operating revenue declined year on year in the first quarter, with consolidated chain-store sales totaling 567.4 billion yen (-9.0% year on year) and consolidated operating revenue totaling 155.3 billion yen (-13.1%).

Meanwhile, first-quarter existing-store sales in Japan (excluding ticket and gift-card sales etc.) decreased by 9.9%. Existing-store sales suffered a heavy blow from the decline in customer visits despite strong stay-at-home demand and consequent growth in sales of daily fresh food items, frozen foods, alcoholic drinks, processed foods, hygiene products, and our “overwhelmingly delicious” desserts.

On the profit front, first-quarter consolidated operating profit declined by 81.6% to 2.6 billion yen and consolidated ordinary profit declined by 91.0% to 1.2 billion yen. While the strong sales at Seijo Ishii and Lawson Store 100 were buoyed by rising supermarket demand, sales for the Japan convenience store business as a whole dropped considerably. Sales from our entertainment business also declined significantly the multiple cancellation or postponement of events dealt a blow to ticket sales and temporary closures of cinemas adversely affected attendance numbers. Temporary costs related to COVID-19 also contributed to the 4.1 billion consolidated net loss recorded for the March-to-May period.

Key Actions Taken in the First Quarter (March-to-May 2020)

As part of our aim to ensure Lawson is loved and recommended by all customers, we have worked to strengthen initiatives designed to achieve our three key outcomes of superior taste, human kindness, and environmental (Machi) friendliness.

•Products: Our Kinshari onigiri series in the rice category, our new GU-BO hot snacks in over-the-counter fast food, our “new sense sweets,” which pay particular attention to mouthfeel, visual appeal, and high-quality ingredients, and other overwhelmingly delicious-tasting items all contributed to product sales over the quarter.
We also worked hard on our three essentials for health: low salt, low sugar, low additives and released a new salt-free, chemical flavoring-free curry product in March that successfully revealed the true flavor of the food.
We also strove to reduce plastic use by changing the wrappings on rice balls and changing specifications on cup drinks.

•We renewed the logo and packaging of private brand products based on the concept of encouraging people to enjoy family life to the full. We have restructured our Lawson Select brand into two new brands, L basic and L marche and have started launching new items under those brands.

•In May, we updated Lawson’s official smartphone app and further improved customer convenience by displaying all functions they want to use for payment at once.

•To prevent the spread of COVID-19 in our stores, we prioritized the safety of our customers and store employees, put up vinyl sheet partitions at cash registers, maintained social distancing, informed customers about less-crowded time periods to encouraged customers to spread out store-visiting times, encouraged employees to wash their hands and gargle, disinfected surfaces with alcohol, and encouraged the wearing of mask, etc. We also made expanded the number of stores using Lawson point-of-sale (POS) cash registers, which are now all equipped with self-checkout services, and expanded the number of stores utilizing this function.
In August 2019, we started introducing food delivery services (Uber Eats) in Tokyo. To meet new stay-at-home food demand, we subsequently started expanding this service to a number of stores in Tokyo and 9 other areas nationwide from May 2020.

•As COVID-19 continued to spread, we worked to implement various measures that use Lawson stores to bring people in the community closer together. These included free delivery of onigiri rice balls to school childcare facilities after schools were temporarily closed nationwide, our “Picture-painting Lawson” service that offered free printing of famous character coloring pages, and supporting local producers by working with businesses all over the country to develop new products.

•New initiatives for supporting franchise owners: We have been striving to build stronger partnerships with franchise owners by providing fresh short, medium and long-term support, including additional support to owners seeking to increase their number of franchise stores, providing store manager training support, and expanding ways of help new franchise owners. We are also supporting business continuity for franchise owners in business and commercial areas who have seen customer numbers and sales drop dramatically as a result of COVID-19 by helping them access government support funds and providing head office management support.

Business conditions for Lawson and our franchise stores are growing increasingly severe. However, I am determined to encourage head office staff and franchise owners to work together to achieve our aim of creating happiness in our communities based on the new LAWSON WAY action guidelines established this business year.

Revisions to FY2020 Business and Dividend Estimates

We believe that consumer spending will take time to recover from the blow that COVID-19 has exerted on our economy, society, and lives. We have calculated the below business forecasts for FY2020 on the assumption that we do not see the implementation of any deeper restrictions on social, such as the declaration of another state of emergency again in Japan. Against this background, we expect to pay the same shareholder dividend of 150 yen per share in FY2020 as in FY2019.

Revised business estimates:

Annual dividend per share 150 yen

As we move forward into a new with-corona lifestyle, we intend to work to further build our partnership with franchise owners, so we can aim to strengthen daily fresh foods, frozen foods, and other daily-living support categories and also strengthen our role as a “fun-life support store” by offering great new products and entertainment events. I ask for the kind understanding and support of all our stakeholders in our carefully considered effort to build firm business strategy in these difficult times.