During the nine months from March to November 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 during the third quarter, but, thanks to the government-led Go To Campaign to encourage domestic travel and other initiatives, we did see some signs of a gradual recovery in economic and social activity. For our part, Lawson has continued to respond flexibly by strengthening product ranges that stay abreast of expanding teleworking practices and other changing customer lifestyles and daily needs.

Looking first at our convenience store business in Japan, while customer numbers and sales did decrease on the back of changing customer lifestyles and the more subdued movement of people, we noted some signs of a pick up as we responded closely to changing customer needs. However, the sharp rise in COVID-19 infections once into November negatively affected customer visits and sales trends. In terms of store numbers, in the first nine months of FY2020, Lawson opened 313 stores and closed 254 stores, resulting in a net increase of 59 stores and a total number of 14,503 convenience stores in Japan at the end of November 2020. Internationally, we pressed ahead with new store openings, resulting in a net increase of 516 stores over the period and a total of 3,434 international stores at the end of November 2020.

Against this background, both consolidated chain-store sales and operating revenue declined year on year in the first nine months, with consolidated chain-store sales totaling 1.7711 trillion yen (-6.8% year on year) and consolidated operating revenue totaling 497.4 billion yen (-9.7%). In terms of Lawson Japan existing-store sales, sales increased in five categories where we had expanded the range of products on offer to reflect the greater number of people cooking at home and refraining from going out (fresh vegetables, frozen foods, daily delivery food, alcoholic beverages, and room-temperature Japanese and Western sweets) and sales of desserts were also strong, but this recovery was not sufficient to offset the reduction in customer visits, resulting in a 8.9% year-on-year decline in existing-store sales over the period.

On the profit front, consolidated operating income for the first nine months declined by 37.9% year on year to 32.3 billion yen, consolidated ordinary income declined by 37.8% to 30.2 billion yen, and consolidated net income declined by 54.1% to 11.9 billion yen. 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. Regarding our entertainment-related business, given the ongoing restrictions surrounding the staging of concerts and events, we worked instead to expand ticket sales handling for live online concerts. While cumulative sales for our movie division declined, we did start to see a gradual recovery in cinema attendance once into the second half and that increase picked up sharply with the release of popular movies in October. That being said, we continued to successfully cut business costs in the prevailing environment thanks to reduced food disposal, more efficient digital sales promotions, and lower travel and conference expenses.

Key Actions Taken in the Third Quarter of FY2020

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: Several new series contributed to our pursuit of superior taste, including our chilled lunchboxes and Kinshari rice balls series in the rice category, our microwave noodles series supervised by popular ramen stores nationwide in the cooked noodle category, and our Uchi Cafe Specialite series with carefully selected ingredients and menus to provide the perfect simple taste. Within our drive to fulfill stay-at-home needs, customers appreciated our efforts to expand the products they desired most in their daily lives, such as frozen foods, daily delivery foods, and fresh vegetables, etc. We also achieved some success in attracting customers into stores by conducting in-store campaigns centered around hugely popular anime characters in October, and around our tie-up with new, in-focus artists in November?both of which enabled us to create an entertainment-filled atmosphere in stores and offer collaborative products.

•Environmental initiatives: We launched our “Kindness Project” designed to help alleviate environmental issues. We have reduced single-use checkout bags by approximately 75%, which is higher than the 60% reduction heralded by the Ministry of the Environment and the Ministry of Economy, Trade and Industry. We are also working to reduce food waste and reduce store CO2 emissions by selling lunchboxes and cooked noodles in paper packaging, switching to paper cups for our iced MACHI cafe drinks, and generally striving to reduce plastic in product packaging.

•Food delivery service: To meet growing demand for food delivery services in the wake of COVID-19, we launched a foodpanda service in November to complement our existing Uber Eats delivery service. At the end of November 2020, 1,472 stores in 27 metropolitan and urban areas were able to offer food delivery through these two services.

•Franchise owner profits: 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. Franchise store profits rose year on year in the three months to November 2020 as a result of these efforts. We continue to support franchise owners who have seen sales plummet as a result of COVID-19 and we are also implementing ongoing 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. In November 2020, we instigated internal inspections and formulated improvement plans based on the “Fact-Finding Survey Report on Transactions between the Headquarters of Convenience Stores (Franchisers) and their Franchisees” (September 2020) and the “Fact-Finding Survey on Transactions between the Headquarters of Convenience Stores (Franchisers) and their Franchisees (Overall Questionnaire Results)” compiled by the Japan Fair Trade Commission. 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.

•In September 2020, we concluded a joint business agreement with POPLAR Co., Ltd. to convert some of the stores, currently operated under the POPLAR, SEIKATSU SAIKA, and THREE EIGHT brands, into either LAWSON POPLAR or Lawson brand stores from March 2021.

I believe it will take time 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 products and services that customers want from convenience stores. At the same time, we are seeking to create “Hub of refreshment in every community” that offer not only convenience but also create fun times through new products and entertainment opportunities. We have not made any changes to Lawson’s initial forecasts for FY2020 consolidated operating income of 35.0 billion yen and a shareholder dividend of 150 yen per share, and I urge our shareholders and investors to patiently support Lawson’s management strategy during this difficult period.