Lawson, Inc. Interim Earnings Presentation Six Months Ended August - - PowerPoint PPT Presentation

Lawson, Inc. Interim Earnings Presentation Six Months Ended August 31, 2001

(Year Ending February 28, 2002)

October 16, 2001 (Tue.) 13:00~14:30 Kenji Fujiwara President and CEO (Room Harumi, Royal Park Hotel)

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Contents

• 1. Change in Composition of Shareholders
• 2. First-Half Results and Second-Half Targets
• 3. Operations

Store Development Existing Store Sales Comparison (Product and Entertainment Strategies) E-business (Loppi and Lawson Tickets)

• 4. New Value Creation

ATM Development Cooperation With Mitsubishi Corp.

• 5. Conclusion

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Change in Composition of Shareholders (Since Selling Shares)

The floating shareholder ratio now exceeds 50% The floating shareholder ratio now exceeds 50% due to the repurchase and retirement of treasury stock due to the repurchase and retirement of treasury stock and the recent sale of shares by Daiei, Inc. Consequently, and the recent sale of shares by Daiei, Inc. Consequently, management is more focused than ever on creating management is more focused than ever on creating shareholder value. shareholder value.

As of August 31, 2001 29.8% 10.7% 6.4% 1.7% 1.2% 3.0% 17.7% 17.3% 12.3% As of June 30, 2001

27.9% 10.0% 27.2% 1.1% 2.6% 7.8% 9.6% 13.8% Mitsubishi Corp. Marubeni Corp., Nintendo Co., Ltd., “Big Four” banks Daiei Retirement Benefit Trust Daiei Group FC owners' and Employees’ Shareholder Association Companies Overseas Institutional Investors Domestic Institutional Investors Individuals and Others

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First-Half Target First-Half Result Difference YoY Difference Second-Half Target Full-Year Target

Openings

300 237

• 63
• 89

413 650

Closures

350 349

• 1

228 101 450

Daily sales at existing stores (YoY)

100.0% 99.3%

• 0.7%

0.0% 99.0% 99.1%

Daily sales at new stores (¥ thousands)

460 476 16 26 － 460

Gross profit margin

30.4% 30.3%

• 0.1%
• 0.1%

30.3% 30.3%

Ratio of franchise stores

92.6% 92.7% 0.1% 3.8% － 93.8%

Total no. of stores (Japan)

7,633 7,571

• 62
• 12

－ 7,883

First-Half Results and Second-Half Targets

With the exception of openings, results were largely With the exception of openings, results were largely in line with provisional first in line with provisional first-

• half targets.

half targets. We are now focused on hitting our second We are now focused on hitting our second-

• half targets.

half targets.

5 (Non-Consolidated Basis) (¥100 million) First-Half Target First-Half Result Difference YoY Difference Second-Half Target Full-Year Target Total net sales 6,700 6,630

• 70

128 6,410 13,040 Total transaction volumes 6,890 6,855

• 35

174 6,595 13,450 Operating income 236 233

• 3

2 200 433 Recurring profit 228 226

• 2

10 197 423 Net income 108 115 7 30 82 197 (Consolidated Basis) (¥100 million) Operating income 233 232

• 1

192 425 Recurring profit 224 225 1 7 191 416 Net income 105 115 10 28 77 192

First-Half Results and Second-Half Targets (Actual Results and Forecasts)

First First-

• half targets largely achieved despite

half targets largely achieved despite difficult market conditions. Focus now on difficult market conditions. Focus now on achieving second achieving second-

• half and full

half and full-

• year targets.

year targets.

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Mar.-Aug. (Cum.) Full-Year Target Openings

237 650

Closures (FC)

188 200

Closures (RC)

161 250

Closures subtotal

349 450

Relocations

91 －

Change

• 112

200

As of Feb. 28, 2001 As of Aug. 31, 2001 Contracts

258 324

• No. of stores (FC)

6,972 7,022

• No. of stores (RC)

711 549

Ratio of franchise stores (%)

91 93

Operations ― Store Data

These numbers underscore the success of These numbers underscore the success of Lawson Lawson’ ’s ongoing s ongoing “ “From Quantity to Quality From Quantity to Quality” ” initiative. initiative. 450 476 421 460 390 400 410 420 430 440 450 460 470 480

(¥ thousands)

• Aug. 2000
• Aug. 2001
• Feb. 2001
• Feb. 2002

(Target) Year-on-Year Comparison of Daily Sales at New Stores

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Store Openings and Daily Sales at New Stores in the Tokyo Metropolitan Area and Tokyo

Store Openings in the Tokyo Metropolitan Area and Tokyo

10 20 30 40 50 60 70

• Aug. 1999 Aug. 2000 Aug. 2001

(Stores)

New Store Daily Sales in the Tokyo Metropolitan Area and Tokyo

350 400 450 500 550 600 650 700

Aug. 1999 Aug. 2000 Aug. 2001

(¥ thousands)

Tokyo Tokyo metropolitan area

Strong momentum for opening high Strong momentum for opening high-

• quality stores in

quality stores in Tokyo and the Tokyo metropolitan area. Key is Tokyo and the Tokyo metropolitan area. Key is channeling human resources to these areas. channeling human resources to these areas.

Tokyo metropolitan area: Tokyo, Kanagawa, Chiba, Saitama

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Total No. of Stores and Average Daily Sales in the Tokyo Metropolitan Area and Tokyo

Strategic relocations and store closures are Strategic relocations and store closures are improving the quality of the Lawson chain in improving the quality of the Lawson chain in the Tokyo Metropolitan Area. the Tokyo Metropolitan Area.

Total No. of Stores in the Tokyo Metropolitan Area and Tokyo

200 400 600 800 1000 1200 1400 1600 1800

• Aug. 1999
• Aug. 2000
• Aug. 2001

(Stores)

Average Daily Sales in the Tokyo Metropolitan Area and Tokyo

460 470 480 490 500 510 520 530 540 550 560 570

• Aug. 1999
• Aug. 2000
• Aug. 2001

(¥ thousands)

Tokyo Tokyo metropolitan area

Tokyo metropolitan area: Tokyo, Kanagawa, Chiba, Saitama

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Store Openings and Daily Sales at New Stores in the Kinki Region and Osaka

Store Openings in the Kinki Region and Osaka

5 10 15 20 25 30 35 40

• Aug. 1999
• Aug. 2000
• Aug. 2001

(Stores)

New Store Daily Sales in the Kinki Region and Osaka

350 400 450 500 550 600 650 700

• Aug. 1999
• Aug. 2000
• Aug. 2001

(¥ thousands)

Osaka Kinki region

Having already improved the quality of stores, Lawson Having already improved the quality of stores, Lawson has now turned its attention to opening more stores in has now turned its attention to opening more stores in the Kinki region and Osaka by channeling human the Kinki region and Osaka by channeling human resources to these areas. resources to these areas.

Kinki region: Osaka, Kyoto, Hyogo

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Total No. of Stores and Average Daily Sales in the Kinki Region and Osaka

Total No. of Stores in the Kinki Region and Osaka 200 400 600 800 1000 1200 1400 1600 1800

• Aug. 1999
• Aug. 2000
• Aug. 2001

(Stores)

Average Daily Sales in the Kinki Region and Osaka 460 470 480 490 500 510 520

• Aug. 1999
• Aug. 2000
• Aug. 2001

( ･ t h

• u

s a n d s )

Osaka Kinki region

Strategic relocations and store closures Strategic relocations and store closures are improving the quality of the Lawson chain are improving the quality of the Lawson chain in the Kinki region, including Osaka. in the Kinki region, including Osaka.

Kinki region: Osaka, Kyoto, Hyogo

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Building on Lawson’s First-Mover Advantage

To retain and build on its first-mover advantage, Lawson will:

・Adhere to “grid points” policy ・Develop stores and raise distribution productivity by forging ties with local convenience store chains ・Make effective use of Mitsubishi Corp.’s networks ・Cooperate with ATM-Partner regional banks

Lawson will retain and build on its first Lawson will retain and build on its first-

• mover

mover advantage by pursuing three main strategies: advantage by pursuing three main strategies: (1) (1) Continue to concentrate store openings on the basis Continue to concentrate store openings on the basis

• f redefined
• f redefined “

“grid points, grid points,” ” (2) (2) Efficiently secure prime store sites, and Efficiently secure prime store sites, and (3) (3) Take maximum advantage of its unique resources. Take maximum advantage of its unique resources.

• No. of Stores and Average Daily Sales in First-to-Enter Regions

300 350 400 450 500 550 600 650

• Aug. 1999
• Aug. 2000
• Aug. 2001

(Stores/¥ thousands)

• No. of stores

Average daily sales (All stores) Average daily sales (New stores)

First-to-enter regions: Aomori, Akita, Kagawa, Tokushima, Ehime, Kochi

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Improving the Quality of the Nationwide Chain (1)

400 900 1400 1900 2400

(Stores)

～350 350～400 400～450 450～500 500～600 600～

(¥ thousands)

• No. of Stores by Daily Sales

As of August 31, 2000 As of August 31, 2001

Lawson will improve overall chain quality by aggressively reloca Lawson will improve overall chain quality by aggressively relocating ting and closing stores and raising daily sales of new stores. A conc and closing stores and raising daily sales of new stores. A concurrent urrent goal is improving earnings of FC owners through relocation and goal is improving earnings of FC owners through relocation and management of multiple stores. management of multiple stores.

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50 100 150 200 250 300 350 400 450 500 Daily sales

Improvement in Daily Sales Due to Relocation

• Aug. 2000
• Aug. 2001

491 492 503 480 490 500 510

(¥ thousands)

• Aug. 1999
• Aug. 2000
• Aug. 2001

Average Daily Sales of All Stores

Improving the Quality of the Nationwide Chain (2)

Lawson will improve overall chain quality by aggressively reloca Lawson will improve overall chain quality by aggressively relocating ting and closing stores and raising daily sales of new stores. A conc and closing stores and raising daily sales of new stores. A concurrent urrent goal is improving earnings of FC owners through relocation and goal is improving earnings of FC owners through relocation and management of multiple stores. management of multiple stores.

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Product and Entertainment Strategies—Raising Daily Sales at Existing Stores

Customers, Unit Price per Customer and No.

• f Existing Stores

96 97 98 99 100 101 102 103 104 105 Mar. Apr. May Jun. Jul. Aug.

(%)

• No. of customers (YoY)

Unit price per customer (YoY) Sales at existing stores (YoY)

(First Half) ・ Ran special monthly promotions from March through August ・ Certain product lines offered at value-for-money prices (Second Half) ・ Minimize the proportion of “sale” products (Continual introduction of appealing products developed under Fresh Foods Supply Cooperative (FFS)) ・ Develop FFS-related products with improved gross-profit margins by systematically procuring ingredients

Product Strategy

(First Half) ・ Sold 320,000 tickets for the hit Japanese movie Sen to Chihiro no Kamikakushi (Spirited Away) ・Sold 300,000 tickets for Japanese rock group GLAY’s EXPO concert ・Sold 380,000 tickets for Universal Studios Japan under exclusive agreement (Second Half) Exclusive sales of tickets for the Ghibli Museum Exclusive advance ticket sales for Hitomi Yaita’s concert tour Exclusive advance ticket sales for pop star Misia’s concert tour Exclusive ticket sales for GLAY’s Tokyo Dome Concert

Entertainment Strategy

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E-business (Loppi and Lawson Tickets)

Loppi Transaction Volumes 1,000 2,000 3,000 4,000 5,000 6,000 7,000

• Mar. Apr. May

Jun. Jul. Aug. (¥ millions) 0.0% 20.0% 40.0% 60.0% 80.0% 100.0% 120.0% 140.0% 160.0% 180.0% 200.0% Transaction volumes YoY sales

E E-

• business is a field where Lawson has a competitive edge

business is a field where Lawson has a competitive edge among CVS. Lawson will maintain rapid growth among CVS. Lawson will maintain rapid growth momentum, by differentiating itself from other companies. momentum, by differentiating itself from other companies.

Lawson Tickets Sales 1,000 2,000 3,000 4,000 5,000 6,000

• Mar. Apr. May Jun.
• Jul. Aug.

(¥ millions) 0.0% 20.0% 40.0% 60.0% 80.0% 100.0% 120.0% 140.0% 160.0% 180.0% 200.0% Transaction volumes YoY sales

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Economic Effect of Unintended Shopping (33% x ¥500 per ATM user) Cash withdrawals Cash deposits Account transfers Account balances Cash advance services

Provision of total cashing services

• No. of ATMs
• Approx. 400 Approx. 1,500 Approx. 2,300 Approx. 3,000

2001 2001 2002 2003 Late Oct.

• Dec. 31
• Feb. 28
• Feb. 28 (Target)

Installation Plan Estimated Contribution to Daily Sales

Lifts daily sales by approx. ¥10,000 (Approx. 2% increase)

60 transactions (avg.) x 33% x ¥500

Lawson ATM users Assumption: 60 transactions per day per machine

New Value Creation ― ATM Development

ATMs are expected to have the same beneficial effect as ATMs are expected to have the same beneficial effect as increasing the ratio of tobacco and liquor licenses increasing the ratio of tobacco and liquor licenses— — drawing in more customers and raising daily sales drawing in more customers and raising daily sales

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New Value Creation ― Cooperation With Mitsubishi Corp. (Work Flow) Secondments Exercise leadership within Lawson Task forces established at Mitsubishi Corp. Identify issues and develop action plans Execute Measure effect

Store development: Executive Vice President Koji Wada + 1 other New business: Managing Director Teruo Aoki (General Manager, New Business Strategy Division) + 4 others Information systems: Managing Director Susumu Hasegawa (General Manager, Office of Information Systems) + 2 others Products: Director Yoshimitsu Futai (Deputy General Manager, Merchandising Division) + 1 other Planning: Director Eiichi Tanabe (Deputy General Manager, Office of Corporate Planning & Control) + 1

• ther

Logistics: Imai (Deputy General Manager, Logistics Division) + 1 other

SCM Task Force Store Development Support Task Force Construction Materials Task Force Financial Services Task Force LETSS Task Force (ITF)

Lawson Lawson’ ’s strategic tie s strategic tie-

• up with Mitsubishi Corp. is already

up with Mitsubishi Corp. is already producing results in certain areas. There is considerable producing results in certain areas. There is considerable potential for more benefits. potential for more benefits.

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New Value Creation ― Cooperation With Mitsubishi Corp. (Specific Examples)

Joint Development of Content to Entice Customers to Lawson (New Business Strategy Division) ・ATM operations company ・ E-commerce-related companies ・ Loppi content support (Spirited Away) ・ Possibility of financial services Introduction by Mitsubishi Corp. to Sites With High Daily Sales Potential (Development Division) ・Site introductions Over 250 ・Stores already opened 16 (Average daily sales exceed ¥500,000) ・Contracts closed 11 ・Negotiations underway 50-60 projects ・Mitsubishi Corp. has committed to introducing sites selected from network of business partners Support for Development of Effective Information System (New Business Strategy Division) ・Raise LETSS (Lawson’s Epoch-making Total Strategic Systems) productivity ・Reduce hardware purchasing costs ・Increase commitment of all users Supply Chain Management (Merchandising and Logistics divisions) ・Reform logistics for products transported in all temperature ranges —Streamline DDC and network FDC —Raise CDC productivity and develop horizontally ・Eliminate inefficiencies, waste and overlap through SCM ・Reduce materials purchasing costs Strategic Development in Broad Range of Areas (Office of Corporate Planning & Control) ・Share buybacks and retirements, overseas share sales ・ Pursue synergies through alliances with Mitsubishi Corp. and other companies

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• Operating Environment ― Continuing difficulties in August and September, but
• improving. Moving forward on all fronts to achieve goals
• New Value Creation ― Results becoming evident, considerable room for growth
• Management focused on creating shareholder value
• Medium-Term Targets

– Recurring profit growth rate: 5/10/10% – ROA and ROE of no less than 12% (Fiscal 2003 year-end)

Conclusion