During the six months from March to August 2020, Lawson, Inc. has pursued business activities that give concrete shape to our corporate philosophy, “Creating Happiness and Harmony in Our Communities”. The global spread of the COVID-19 virus during the first half of the business year resulted in a declaration of a state of emergency in Japan from April into May, the subsequent temporary closure of various facilities, the cancellation of events, and voluntary stay-at-home practices, all of which had an enormous negative impact on economic and social activities and people’s daily lives. Against that background, Lawson has focused on forging a strong policy to prevent the spread of the infection and responding flexibly to changing customer lifestyles and daily needs.

Looking first at our Japan convenience store business, sales did show some nascent signs of recovery in June following the lifting of the state of emergency. However, renewed requests to stay at home following a resurgence in the number of COVID-19 infections in July along with prolonged torrential rains and a late end to the rainy season all served to dampen customer visits and sales. In terms of store numbers, in the first half of FY2020, Lawson opened 236 stores and closed 180 stores, resulting in a net increase of 56 stores and a total number of 14,500 convenience stores in Japan at the end of August 2020. Internationally, we pressed ahead with new store openings, resulting in a net increase of 212 stores and a total of 3,130 international stores at the end of August 2020.

Against this background, both consolidated chain-store sales and operating revenue declined year on year in the first half, with consolidated chain-store sales totaling 1.1732 trillion yen (-8.1% year on year) and consolidated operating revenue totaling 322.8 billion yen (-12.5%).

In terms of existing- store sales, sales of daily fresh food items, frozen foods and other items increased after we expanded the range of products on offer to reflect the greater number of people cooking at home and refraining from going out. Sales of desserts also remained strong. However, customer visits didn’t pick up, resulting in an 9% year-on-year decline in first-half existing-store sales in Japan (excluding ticket and gift-card sales etc.) in the first half of FY2020.

On the profit front, first-half consolidated operating income declined by 54.6% to 16.6billion yen, consolidated ordinary income declined by 57.7% to 14.8 billion yen, and consolidated net income declined by 83.6% to 3.3 billion yen year on year. While strong sales at Seijo Ishii were supported by continued buoyant supermarket demand, sales for the Japan convenience store business as a whole dropped considerably. Despite our efforts to expand our handling of tickets for live online concerts in light of ongoing restrictions surrounding the staging of concerts and events, sales from our entertainment business declined significantly on the back of lower ticket sales and lower cinema attendance as new movie releases were postponed.

Key Actions Taken in the First Half of FY2020 (March-to-August 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: Limited-offer products such as our Kinshari onigiri series in the rice category and 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 first half. Furthermore, our marketing campaign featuring our most popular instore products successfully attracted customers to our stores by providing a venue for people to enjoy entertainment and Lawson products.

•We pursued some initiatives designed to satisfy stay-at-home demand, including expanding our range of high-demand goods in daily life such as frozen foods as well as starting to sell single vegetables on our Fresh Vegetable Market displays in all Lawson stores nationwide to meet changing customer needs. With customers keen to get some enjoyment out of eating even when they are being encouraged not to go out, we got together with entrepreneurs whose businesses have been harshly impacted by COVID-19 to develop Machikado Kitchen and fast food products that both satisfy customer needs and support business.

•As part of a combined effort to protect the environment, companies have been obliged to charge for single-use plastic bags at checkouts in Japan from July. Lawson charges three yen for a plastic bag and we are also striving to reduce overall plastic use by switching to plastic that includes 30% plant-derived materials as specified.

•To prevent the spread of COVID-19 in our stores, we have prioritized the safety of our customers and store employees by installing vinyl partitions at cash registers, maintaining social distancing, encouraging customers to spread out store-visiting times, encouraging employees to wash their hands and gargle, disinfecting surfaces with alcohol, and encouraging the wearing of masks, etc. We have also encouraged customers to use the self-checkout facilities installed in all stores across Japan.

•In August 2019, we started introducing food delivery services (Uber Eats) in Tokyo. To meet new stay-at-home food demand, we had further expanded this service to over 1,000 stores in 12 metropolitan and urban areas by the end of August 2020.

•In order to help boost franchise owner profits, we worked to reduce significant store management cost items such as food disposal losses, utility costs, and wages, and franchise store profits rose year on year on the first half as a result of these efforts. We are also working to build even stronger partnerships by offering financial and other support to franchise owners who have seen sales plummet as a result of COVID-19. We have continued to implement short, medium and long-term measures to help achieve stable store management, including extending additional support to owners seeking to increase their number of franchise stores, providing store manager training support, and expanding ways to help new franchise owners. Business conditions for Lawson and our franchise stores are growing increasingly severe. However, we are encouraging 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.

I believe it will take longer for consumption to recover due to the heavy impact of COVID-19. We are striving to respond as swiftly as possible to changes in customer purchasing behavior and the things customers want from convenience stores (products and services). At the same time, we are seeking to create “Machi Hot Stations” that offer not only convenience but also create fun times through new products and entertainment opportunities.

Lawson’s initial forecasts for FY2020 consolidated operating income of 35.0 billion yen and a shareholder dividend of 150 yen per share remain unchanged. I ask all our shareholders and investors to kindly understand and support our management strategy in these difficult times.