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    2651   JP3982100004

LAWSON, INC.

(2651)
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Lawson : Flash Report on the Consolidated Financial Results for the Fiscal Year Ended February 28, 2021

04/08/2021 | 02:04am EDT

Flash Report on the Consolidated Financial Results

for the Fiscal Year Ended February 28, 2021

April 8, 2021

Listed Company Name: Lawson, Inc.

Tokyo Stock Exchange (First Section)

Code No.: 2651

(URL http://www.lawson.jp/en/ir)

Company Representative: Sadanobu Takemasu, President and CEO, Representative Director, Chairman of the Board

Contact: Tomoki Takanishi, Senior Vice President, Financial Administration Division Director

Tel.: +81-3-5435-2773

Scheduled date for the ordinary general meeting of shareholders: May 25, 2021

Scheduled date for submission of annual securities report: May 26, 2021

Scheduled date for payment of dividend: May 26, 2021

Supplementary materials for annual financial results: Yes

Holding of presentation of annual results: Yes (for institutional investors and analysts)

(Amounts less than one million yen are truncated)

1. Consolidated operating results for 2020 fiscal year (from March 1, 2020 to February 28, 2021)

  1. Consolidated operating results (cumulative)

Note: Percentages represent increases (decreases) compared with the previous fiscal year.

Gross operating

Profit

Operating income

Ordinary income

attributable to

revenue

owners of parent

For the fiscal year ended

Millions

%

Millions

%

Millions

%

Millions

%

of yen

of yen

of yen

of yen

February 28, 2021

666,001

(8.8)

40,876

(35.1)

37,610

(33.3)

8,689

(56.8)

February 29, 2020

730,236

4.2

62,943

3.6

56,346

(2.3)

20,108

(21.4)

Note: Comprehensive income:

Fiscal year ended February 28, 2021

10,046 million yen

(42.9)%

Fiscal year ended February 29, 2020

17,586 million yen

(32.8)%

Diluted

Ratio of ordinary

Ratio of

Profit per

Return on

operating income to

profit per

income to total

share

equity

gross operating

share

assets

revenue

For the fiscal year ended

Yen

Yen

%

%

%

February 28, 2021

86.84

86.78

3.2

2.8

6.1

February 29, 2020

200.95

200.84

7.3

4.2

8.6

Reference: Share of profit of entities accounted for using equity method:

Fiscal year ended February 28, 2021

332 million yen

Fiscal year ended February 29, 2020

571 million yen

(2) Consolidated financial position

Total assets

Net assets

Shareholders'

Net assets per

equity ratio

share

As of

Millions of yen

Millions of yen

%

Yen

February 28, 2021

1,365,430

272,931

19.6

2,674.53

February 29, 2020

1,357,732

275,347

20.0

2,707.08

Reference: Shareholders' equity:

As of February 28, 2021

267,632 million yen

As of February 29, 2020

270,877 million yen

(3) Consolidated cash flows

Net cash provided

Net cash provided

Net cash provided

Cash and cash

by (used in)

by (used in)

by (used in)

equivalents at end

operating activities

investing activities

financing activities

of period

For the fiscal year ended

Millions of yen

Millions of yen

Millions of yen

Millions of yen

February 28, 2021

227,954

(29,983)

(140,642)

401,136

February 29, 2020

202,703

(49,074)

(163,910)

343,583

2. Dividends

Annual dividends per share

Total

Ratio of

Payout

dividends to

dividends

1Q

1H

3Q

Year-end

Total

ratio

shareholders'

for the year

equity

Yen

Yen

Yen

Yen

Yen

Millions of

%

%

yen

2019 fiscal year

75.00

75.00

150.00

15,009

74.6

5.5

2020 fiscal year

75.00

75.00

150.00

15,010

172.7

5.6

2021 fiscal year

75.00

75.00

150.00

111.2

(forecast)

3. Forecast of consolidated operating results for 2021 fiscal year (from March 1, 2021 to February 28, 2022) Note: Percentages represent increases (decreases) compared with the previous fiscal year.

Gross operating

Operating income

Ordinary income

Profit attributable

Profit per

revenue

to owners of parent

share

Millions

%

Millions

%

Millions

%

Millions

%

Yen

of yen

of yen

of yen

of yen

1H of 2021 fiscal year

358,000

10.9

26,500

58.8

24,500

64.8

13,000

293.0

129.91

2021 fiscal year

728,000

9.3

50,000

22.3

45,000

19.6

13,500

55.4

134.90

4. Notes

  1. Change in significant subsidiaries during the fiscal year (Changes in certain specified subsidiaries resulting in changes in scope of consolidation): None

Added: None

Excluded: None

  1. Changes in accounting policies, changes in accounting estimates or restatements
    1. Changes in accounting policies associated with revision in accounting standards: None
    2. Changes in accounting policies other than 1. above: None
    3. Changes in accounting estimates: None
    4. Retrospective restatements: None
  2. Number of shares outstanding (common stock)
    1. Number of shares outstanding at the end of year (including treasury shares)

As of February 28, 2021:

100,300,000

As of February 29, 2020:

100,300,000

2.

Number of treasury shares at the end of year

As of February 28, 2021:

232,954

As of February 29, 2020:

237,762

3.

Average number of shares during the year

As of February 28, 2021:

100,065,840

As of February 29, 2020:

100,061,451

Reference: Non-consolidated operating results for 2020 fiscal year (from March 1, 2020 to February 28, 2021) Non-consolidated operating results (cumulative)

Note: Percentages represent increases (decreases) compared with the previous fiscal year.

Gross operating

Operating

Profit

Ordinary income

attributable to

revenue

income

owners of parent

For the fiscal year ended

Millions

%

Millions

%

Millions

%

Millions

%

of yen

of yen

of yen

of yen

February 28, 2021

354,825

(9.2)

26,150

(41.5)

33,700

(26.7)

15,894

2.6

February 29, 2020

390,811

1.3

44,725

(2.2)

45,962

(10.7)

15,486

(50.0)

Note: The Flash Report on the Consolidated Financial Results is not subject to audit.

Note: Descriptions on appropriate use of financial performance forecasts and other special notes Forward-looking statements presented herein such as financial forecasts are based on currently available

information and certain presumptions deemed to be reasonable as of the date of announcement. The achievement of said forecasts cannot be guaranteed. Actual results may be materially different from those in the forecast as a result of various factors. For preconditions of these financial forecasts and notes concerning their use, please refer to "1. Overview of Operating Results, (4) Future Outlook" on page 12.

Contents

1. Overview of Operating Results ............................................................................................................

2

(1) Overview of Operating Results for the Fiscal Year under Review ................................................

2

(2) Profit and Loss ...............................................................................................................................

11

(3)

Overview of Financial Position for the Fiscal Year under Review ................................................

11

(4)

Future Outlook ...............................................................................................................................

12

2. Basic Approach to Selection of Accounting Standards........................................................................

12

3. Consolidated Financial Statements and Main Notes ............................................................................

13

(1)

Consolidated Balance Sheet ...........................................................................................................

13

(2)

Consolidated Statement of Income and Consolidated Statement of Comprehensive Income ........

15

Consolidated Statement of Income .................................................................................................

15

Consolidated Statement of Comprehensive Income .......................................................................

16

(3)

Consolidated Statement of Changes in Equity ...............................................................................

17

(4)

Consolidated Statement of Cash Flows ..........................................................................................

19

(5)

Notes to Consolidated Financial Statements ..................................................................................

21

(Going Concern Assumption).........................................................................................................

21

(Accounting Policies for the Preparation of Consolidated Financial Statements) ..........................

21

(Unapplied Accounting Standards, etc.)...............................................................................................................

24

(Changes in Presentation) ...............................................................................................................

25

(Notes to Consolidated Balance Sheet) ..........................................................................................

26

(Notes to Consolidated Statement of Income) ................................................................................

27

(Notes to Consolidated Statement of Comprehensive Income) ......................................................

29

(Notes to Consolidated Statement of Changes in Equity) ..............................................................

30

(Notes to Consolidated Statement of Cash Flows) .........................................................................

32

(Segment Information) ...................................................................................................................

33

(Per Share Information) ..................................................................................................................

39

(Significant Subsequent Events).....................................................................................................

39

1

1. Overview of Operating Results

  1. Overview of Operating Results for the Fiscal Year under Review

During the fiscal year under review, or fiscal 2020 ended February 28, 2021, the novel coronavirus disease (COVID-19) spread across the world. In Japan, the first state of emergency was declared in April 2020. This had an immense impact on the nation's economic and social activities and the daily lives of its people. Although the economy showed a gradual recovery trend after the state of emergency was lifted in May 2020, the number of new infections increased again in November 2020, resulting in the second state of emergency being declared in January 2021 for 11 prefectures including Tokyo. This dampened the recovery in economic and social activities and affected people's daily lives. Meanwhile, changes in consumer lifestyles and purchasing behavior have progressed, such as remote work becoming prevalent. Such changes have also affected the business of the Lawson Group, significantly reducing its net sales, but the Group continues to strive to address the changes by strengthening its merchandise assortment in line with the shifting customer demands, among other measures as strengthening its merchandise assortment, expanding its delivery service, and enhancing its smartphone-based sales campaign initiatives in line with the shifting customer demands.

As a result, for fiscal 2020 on a consolidated basis, gross operating revenue decreased to 666,001 million yen (down 8.8% from previous fiscal year), operating income decreased to 40,876 million yen (down 35.1% from previous fiscal year) and ordinary income decreased to 37,610 million yen (down 33.3% from previous fiscal year). Profit attributable to owners of parent decreased to 8,689 million yen (down 56.8% from previous fiscal year).

Against such a backdrop, based on our belief that as a company that provides essential and life-sustaining infrastructure our most important mission is to meet the needs of local people and stay close to our customers, our headquarters and franchise stores have made unified efforts toward making our stores the "Hub of refreshment in every community" under our Group philosophy of "Creating Happiness and Harmony in Our Communities."

Furthermore, we also focused on improving our group-wide internal control system and addressing operating risks based on the 2020 Basic Policy for Improvement of Internal Control Systems. We will continue promoting internal control going forward.

Operating results by business segment were as follows.

It should be noted that new reportable segments have been applied since fiscal 2020 and that the comparison and analysis of figures for the fiscal year from March 1, 2020 to February 28, 2021 were based on the new reportable segments.

(Domestic Convenience Store Business)

After the state of emergency was lifted in May 2020, recovery trends were seen in the number of customers and sales. However, COVID-19 spread again after November 2020, resulting in the declaration of Japan's second state of emergency in January 2021, which had an immense impact on the number of customers. The number of new COVID-19 cases started decreasing again in February 2021, leading to a recovery trend in customer behavior.

As precautionary store measures against COVID-19, we continued to have transparent plastic barriers installed at cash registers; ensured social distancing; and made sure employees practiced rigorous hand washing and gargling, disinfected their hands with alcohol-based disinfectant, and wore face masks, giving

2

top priority to the safety of customers and store employees. We are also promoting self-checkout systems, which allow us to reduce interpersonal contact at checkout.

In store operations, we are striving to establish LAWSON stores as convenience stores endorsed by all our customers. To this end, we are continuing to implement measures to achieve our three commitments, namely, to pursue compelling taste, to be considerate to people, and to be environmentally friendly. By developing distinctive products that are compellingly delicious and health-conscious, we are aiming to further reinforce our product lineup, while rigorously working to offer thoughtful customer service at our stores and ensure environmental friendliness by reducing food waste, the use of plastics and CO2 emissions, etc.

[Store Operations]

In store operations, we continued to focus on reinforcing adherence to the Three Essential Practices, which emphasizes (1) serving customers courteously; (2) offering a merchandise assortment focused on basic items with high demand; and (3) keeping our stores and communities clean. Furthermore, we kept up our initiatives to increase the profits made by franchise stores, including helping them streamline their store operation and reduce costs associated with food waste and utility expenses. Meanwhile, we also focused on expanding our merchandise assortment of items subject to heightened demand amid the COVID-19 crisis in our efforts to respond to customer needs and increase sales.

[Merchandising and Service Strategies]

Net sales decreased significantly owing to a decline in the number of customers, but sales surged in fresh vegetables, frozen foods, and daily delivered foods, among others, as a result of expanding the merchandise assortment in response to the rise in home cooking instead of dining out. In the spring of 2020, we divided our Lawson Select private brand products into two series, "L basic" and "L marche." We are working to develop new products for the private brands with newly designed logos and packaging, focusing on ready- made dishes that are high in demand.

We will continue creating stores tailored to customers' changing lifestyles and needs amid the spread of COVID-19.

In the rice range, we revamped our "Kinshari Onigiri Rice Ball" series in November 2020 by blending different varieties of brand-namerice-produced in the prefectures of Yamagata, Ishikawa, Toyama, or Gifu-for different geographic markets. High value-added products in the series such as those featuring rare and seasonal ingredients were launched, enjoying high popularity.

In the cooked noodles range, we launched the "RAMEN YOKOCHO" series of microwavable noodle products in October 2020 under the supervision of popular ramen noodle eateries nationwide, and they enjoyed robust sales.

In the dessert range, our original dessert products contributed to sales. Specifically, the "Uchi Café Spécialité" series, our newly released "reward dessert" products that bring out the pure tastiness of the ingredients, was well received by customers, along with our regular products including our BASCHEE Basque-style cheesecake as well as our novel dessert products that we are continuing to develop.

The Machikado Chubo in-store kitchen service offering freshly prepared boxed meals is being received well, partly owing to reduced opportunities to go out amid the COVID-19 crisis.

A range of promotional campaigns featuring popular contents designed to be fun for a wide variety of customers proved effective in driving sales of related products.

In food delivery service, for which needs have been growing owing to the COVID-19 crisis, we started

3

offering delivery service through foodpanda in November 2020 in addition to Uber Eats. As a result, the combined number of stores listed on food delivery services reached 1,472 in 27 prefectures as of February 28, 2021. In addition, Uber Eats started delivering over-the-counter (OTC) drugs sold at three LAWSON stores in Tokyo as the first OTC drugs included in Uber Eats' lineup in Japan.

The SMARI service, our non-face-to-face package shipment service using SMARI Box, which had been designed exclusively for the service, was expanded into the Chubu region in November 2020, with 250 stores in Aichi Prefecture introducing the service. As of the end of February 2021, the service is offered at 2,850 stores in the Tokyo, Nagoya and Osaka metropolitan areas.

[Breakdown of Sales by Merchandise Category at Chain Stores in Domestic Convenience Store Business]

Fiscal year

Previous fiscal year

Current fiscal year

From March 1, 2019

From March 1, 2020

To February 29, 2020

to February 28, 2021

YoY(%)

Sales

Percentage

Sales

Percentage

Product group

(Millions of yen)

of total (%)

(Millions of yen)

of total (%)

Processed foods

1,237,391

52.8

1,156,760

53.4

93.5

Fast foods

546,542

23.3

462,497

21.3

84.6

Daily delivered foods

351,442

15.0

343,772

15.9

97.8

Nonfood products

209,624

8.9

202,788

9.4

96.7

Total

2,345,000

100.0

2,165,818

100.0

92.4

[Store Development]

In opening new stores, the Group continued to focus on developing profitable stores.

During the fourth quarter under review, the total number of LAWSON, NATURAL LAWSON and LAWSON STORE100 stores opened in Japan stood at 373 stores. Meanwhile, a total of 341 stores in the country were closed. As of the end of February 2021, the total number of domestic stores was 14,476.*

In an effort to establish convenience store models catered to an aging population and a trend toward self- treatment, we are building partnerships with dispensing pharmacy and drug store chains to operate healthcare-oriented LAWSON stores that offer over-the-counter pharmaceuticals and prescription drugs, as well as a wider assortment of cosmetics and daily necessities than conventional LAWSON stores. The number of stores offering non-prescription drugs has reached 250 stores (includes 53 pharmacy LAWSON stores equipped with drug-dispensing pharmacies) as of the end of February 2021. Moreover, the number of stores offering nursing care consultation services has reached 23 as of the end of February 2021. Furthermore, we have also been expanding our chain of "in-hospital LAWSON stores," which feature strengthened focus on goods for inpatients and medical, sanitary, and nursing supplies in addition to merchandise and services offered at standard convenience stores. The number of such stores has reached 335 as of the end of February 2021. Building on our expertise developed through operation of in-hospital LAWSON stores, we will continue to support the lives of all people interacting with hospitals.

With the aim of supporting our customers' beauty, health, and comfortable lifestyles, our NATURAL LAWSON stores offer an exclusive assortment of items including original products adopting select ingredients as well as products produced in collaboration with renowned brand names. Meanwhile, our LAWSON STORE100 stores, which are mini supermarkets in the size of a convenience store, aim to sustain

4

the daily lives of consumers by offering fresh, high-quality, safe, and reliable fruits and vegetables. The stores are visited by customers of all ages including children and the elderly, and particularly single people and homemakers. As of the end of February 2021, we operate 143 NATURAL LAWSON stores and 679 LAWSON STORE100 stores.

  • The numbers of store openings and closings and total number of stores in Japan include stores operated by Lawson, Inc. and equity-method affiliates, Lawson Kochi, Inc., Lawson Minamikyushu, Inc. and Lawson Okinawa, Inc.

[Change in the Total Number of Domestic Stores]

Total stores as of

Change during

Total stores as of

February 29, 2020

period

February 28, 2021

LAWSON

13,557

97

13,654

NATURAL LAWSON

145

(2)

143

LAWSON STORE100

742

(63)

679

Total

14,444

32

14,476

[Number of LAWSON stores by prefecture (As of February 28, 2021)]

Prefecture

Number

Prefecture

Number

Prefecture

Number

Prefecture

Number

of stores

of stores

of stores

of stores

Hokkaido

679

Ibaraki

226

Kyoto

321

Ehime

212

Aomori

278

Tokyo

1,692

Shiga

155

Tokushima

135

Akita

182

Kanagawa

1,076

Nara

137

Kochi

139

Iwate

182

Shizuoka

281

Wakayama

152

Fukuoka

515

Miyagi

255

Yamanashi

137

Osaka

1,113

Saga

75

Yamagata

113

Nagano

174

Hyogo

663

Nagasaki

112

Fukushima

171

Aichi

723

Okayama

211

Oita

193

Niigata

230

Gifu

183

Hiroshima

244

Kumamoto

160

Tochigi

199

Mie

137

Yamaguchi

120

Miyazaki

111

Gunma

241

Ishikawa

104

Tottori

136

Kagoshima

199

Saitama

695

Toyama

183

Shimane

142

Okinawa

245

Chiba

604

Fukui

109

Kagawa

132

Total(domestic)

14,476

(Note) These figures include stores operated by Lawson, Inc. and equity-method affiliates, Lawson Kochi, Inc., Lawson Minamikyushu, Inc. and Lawson Okinawa, Inc.

[Other]

On September 10, 2020, Lawson, Inc. entered into a joint business agreement with POPLAR Co., Ltd. to convert and operate some of the stores under the POPLAR, SEIKATSU SAIKA, and THREE EIGHT brands into LAWSON POPLAR or LAWSON brand stores.

Based on the content of 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

5

(Overall Questionnaire Results)" compiled by the Japan Fair Trade Commission, Lawson, Inc. implemented a self-inspection program, and formulated and announced an improvement plan on November 30, 2020.

As part of our measures to enhance the financial stability of our franchise stores, we are proceeding with a range of short-,medium-, and long-term initiatives to support them with multiple store ownership, store manager development, and measures for new franchise owners. In addition, we have been providing financial support to stores facing considerable sales declines due to the spread of COVID-19, and will proceed with further measures to increase their sales and profits under strong partnerships with them.

We jointly develop products with regional business operators nationwide that have been affected by COVID-19. Through such initiatives, we aim to support local businesses and producers through our LAWSON stores.

As a result, Domestic Convenience Store Business posted gross operating revenue of 422,501 million yen (down 10.4% from previous fiscal year) and segment profit of 28,739 million yen (down 39.0% from previous fiscal year).

(Seijo Ishii Business)

At stores of Seijo Ishii, a high-end supermarket chain offering quality foods, we provide our customers with well-selected, safe, and reliable foods. The number of directly operated Seijo Ishii stores reached 164 as of the end of February 2021. Demand at supermarkets remained high amid the spread of COVID-19, and demand for perishables including fruit and vegetables as well as meat and fish grew markedly, especially at street-side stores. In addition, Seijo Ishii's original ready-made dishes that had always been popular among many customers were also in high demand, contributing to pushing up overall sales significantly.

By continuing to leverage the company's strengths including its product development expertise, knowhow acquired as a manufacturing retailer, and retailing techniques, we will endeavor to enhance the brand capacity of Seijo Ishii.

As a result, Seijo Ishii Business posted gross operating revenue of 103,037 million yen (up 10.7% from previous fiscal year) and segment profit of 10,329 million yen (up 23.7% from previous fiscal year).

(Entertainment-related Business)

With regard to our Entertainment-related Business, the ticketing business of Lawson Entertainment, Inc., we experienced a precipitous drop in ticket transaction value as a result of event cancellations and postponements owing to the spread of COVID-19. Hosting of events continues to be restricted, but we are striving to expand ticket transactions for online live streaming events featuring prominent artists and for leisure facilities and sports events that have reopened/resumed, as well as boosting our e-commerce business, for which demand has risen due to voluntary stay-at-home efforts.

In our product sales business, a total of 57 stores are in operation nationwide as of February 28, 2021, including our mainstay HMV stores dedicated to selling music and video software, HMV&BOOKS, which markets books, CDs and DVDs, and HMV record shop stores specializing in analog records.

United Cinemas Co., Ltd., an operator of cinema complexes, had to close all its theaters when the state of emergency was declared in April 2020, and operated with limits imposed on audience sizes even after the state of emergency was lifted. Currently, however, it is executing normal operations, with the exception of some regions. Audience numbers continued to grow after popular films were launched in October 2020, resulting in a recovery trend in sales.

6

As of February 28, 2021, all 43 sites nationwide offering 389 screens including those operated on commission are in operation while taking rigorous measures to protect their customers and employees from infection.

As a result, Entertainment-related Business posted gross operating revenue of 57,909 million yen (down 32.1% from previous fiscal year) and segment loss of 297 million yen (segment profit was 5,313 million yen in previous fiscal year).

(Financial Services Business)

With respect to our Financial Services Business, in our ATM business, the foundation of our banking business, we expanded our network of financial institution partners, while working to expand the ATM service of Lawson Bank, Inc.

As of the end of February 2021, the number of ATMs installed nationwide reached 13,458 (up 105 from previous fiscal year), with each ATM used 43.1 times a day on average, decreasing as a result of the decline in the number of customers visiting LAWSON stores due to the spread of COVID-19. The total number of our financial institution partners was 129 nationwide (up 5 from previous fiscal year), including online banks.

By harnessing Lawson Bank's ATMs and their transaction network, we are continuing with our efforts to enhance the bank's functions and convenience and to expand our service partners. In June 2020, we started offering an "instant bank account settlement service," in which money can be withdrawn from a user's bank account to top up a mobile payment app. Furthermore, other new services have been launched including the "ATM charge service," where cash can be charged to the user's mobile payment app at an ATM; the "smartphone ATM service," which allows the user to deposit and withdraw cash at an ATM with the bank's smartphone app without using the user's bank card; and the "ATM deposit service for business operators," which allows store revenues to be deposited to a Lawson Bank account at an ATM by using a dedicated deposit card.

During the fourth quarter, Lawson Bank entered into partnerships with overseas remittance service providers Unidos Co., Ltd. and SBI Remit Co., Ltd., allowing their overseas remittance cards to be used at its ATMs.

In addition, the LAWSON Ponta Plus credit card issued by Lawson Bank allows cardholders to earn additional Ponta points when making purchases with their card at LAWSON, NATURAL LAWSON, and LAWSON STORE100 stores to encourage the use of the card. Furthermore, the Ponta point reward rate was raised in November 2020 to facilitate point accumulation when using the credit card at other stores. By implementing promotional campaigns and soliciting new cardholders at LAWSON stores, we are also trying to expand its membership.

* "Up/down from previous fiscal year-end" represents a comparison with the figure as of the end of February 2020.

As a result, Financial Services Business posted gross operating revenue of 31,573 million yen (down 7.4% from previous fiscal year) and segment profit of 1,753 million yen (down 43.2% from previous fiscal year).

(Overseas Business)

With regards to Overseas Business, the Group's operating companies opened LAWSON stores in the People's Republic of China, Thailand, Indonesia, the Philippines, and the United States of America (Hawaii).

In the People's Republic of China, we advanced into Haikou, Hainan province in October 2020. The

7

number of LAWSON stores in the entire country reached 3,344 as of the end of February 2021. In response to the spread of COVID-19, we closed some stores or shortened their opening hours at the beginning of the fiscal year under review, but as normal operations were resumed relatively earlier than in Japan and other regions, net sales have generally recovered.

In other regions, apart from some stores that have suspended their operations in response to the spread of COVID-19, all other stores are carrying out normal operations, with rigorous infection prevention measures in place, in order to sustain the daily lives of customer

[Distribution of LAWSON Brand Stores Overseas by Region]

Number of stores

Change

Number of stores

Country/Region

(As of February 29,

during fiscal

(As of February 28,

2020)

year

2021)

China

Shanghai and surrounding area

1,574

252

1,826

China

Chongqing

235

106

341

China

Dalian

192

57

249

China

Beijing and surrounding area

153

62

215

China

Shenyang

26

52

78

China Wuhan

401

40

441

China Hefei

50

56

106

China

Changsha

15

50

65

China

Haikou

23

23

Thailand

133

7

140

Indonesia

72

(4)

68

Philippines

65

2

67

United States of America Hawaii

2

2

Total

2,918

703

3,621

As a result, Overseas Business posted gross operating revenue of 61,356 million yen (up 9.2% from previous fiscal year) and segment profit of 809 million yen (segment loss was 1,005 million yen in previous fiscal year).

(Measures to pursue Sustainable Development Goals (SDGs))

With the aim of achieving a sustainable society through Lawson's business activities based on our corporate philosophy, "Creating Happiness and Harmony in Our Communities," we established the SDGs Committee effective March 1, 2019. We are making Group-wide efforts led by our SDGs Committee to conduct individual initiatives that solve social issues through our business activities.

Specifically, we identified issues having significant impacts on the environment, society and economy across our business activities including our value chains, identified social issues that should be prioritized, and uphold them as our six material issues (materiality).

8

"6 Material Issues"

  1. Providing safety/security-oriented overwhelmingly high value-added products and services friendly to society and the environment
  2. Supporting health promotion for all people through products and stores
  3. Providing comfortable work environment leading to job satisfaction
  4. Supporting women, senior people as well as children's growth
  5. Coexisting synergistically with communities by serving as part of social infrastructure
  6. Sustainable environment preservation activities toward carbon-free society

We are especially making focused efforts on addressing our sixth material issue, "sustainable environment preservation activities toward carbon-free society, by setting social and environmental key performance indicators (KPIs) as Goals for 2030 in three areas: (1) reducing food waste; (2) reducing plastic use (for containers, packaging and shopping bags); and (3) reducing CO2 emissions. Furthermore, toward Lawson's Vision 2050, we are taking on difficult challenges to achieve high goals so that we can create a carbon-free society and contribute more to the ideal world that the SDGs aim to realize. To fulfill Lawson's Vision 2050, we are looking back on what we have done so far and examining and discussing what we should do now to steadily proceed with our material issues and KPIs for 2030.

Issues

KPIs for 2030

KPIs for 2050

Reducing food waste

Reduce by 50% over 2018

Reduce by 100%

Reduce by 30% over 2017

Reducing plastic use

(50% of materials used for

(100% of materials used for

Lawson's original product

Lawson's original product

(for containers and packaging)

containers and packaging are

containers and packaging are

eco-friendly)

eco-friendly)

Reducing plastic use

Plastic shopping bags

Plastic shopping bags

Reduce by 100%

Reducing CO2 emissions

CO2 emissions per store

Reduce by 100%

Reduce by 30% over 2013

To reduce food waste, we optimize the number of purchases, offer discounts to sell out all stock, and reduce unsold leftovers by selling special feature items on a reservation basis. Meanwhile, we take leftover food products to recycling plants to have them recycled into pig and chicken feed or fertilizers for growing vegetables. Oil waste is also recycled into nutritional additives for feedstuffs and biodiesel.

To reduce plastic use, we have replaced the plastic cups used for iced coffee and café latte offered at "MACHI café" with paper cups and adopted lids with openings to eliminate the need for straws. We also

9

started charging fees for plastic shopping bags in response to the mandatory surcharge implemented nationwide from July 2020, and now use plastic bags with a mix of 30% plant-derived materials. As a result of these measures, the percentage of Lawson customers declining single-use plastic shopping bags is currently 74.9% as of the end of February 2021.

To prevent global warming and reduce electricity consumption at stores, we have been installing chlorofluorocarbon (CFC)-free (CO2 refrigerant) refrigerator/freezer systems. The number of stores equipped with such systems reached approximately 4,200 as of the end of February 2021, up 500 stores from the end of the previous fiscal year. Furthermore, Lawson, Inc. endorsed the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) in April 2020. To combat worsening climate change issues, we have analyzed climate-related risks and opportunities and made our first disclosure on our official website in December 2020. We will further implement scenario analysis on major transition risks and physical risks, identify their impact on our business strategies, examine measures to take, and endeavor to proactively disclose information.

On March 1, 2021, the position of chief sustainability officer (CSO) was established and assumed by the president and CEO, representative director. We intend to further strengthen our initiatives under the new structure.

We also continued with our scholarship program for children from single-parent families, selecting 400 students to receive scholarships in fiscal 2020. Since August 2019, Lawson has periodically donated original dessert products and processed foods that missed their store delivery deadlines (but were still well within their best-before dates) to the Japan Food Bank Promotion Group and Kodomo Takushoku Oendan, a charity organization that delivers food to children. The donated products are delivered to various bodies across Japan, which then provide them to families who need food aid, children's cafeterias, orphanages, facilities for people with a disability, etc. In fiscal 2020, we donated a total of some 270,000 items (about 30 tons) of food products, including Lawson's original items and national-label products developed exclusively for Lawson.

While working to take protective measures against the spread of COVID-19 at our stores, we have also conducted various initiatives to support people who are forced to persevere amid difficult situations in their day-to-day lives. In March 2020, in response to a request, we distributed free rice balls to after-school childcare centers in 47 prefectures nationwide as a way to supplement children's lunches during the temporary school closure. Under the three-day program, 584,983 rice balls were delivered to 307,332 children at a total of 7,163 facilities. In addition, for children with limited space to play during the stay-home period, LAWSON stores helped them have fun at home by offering free printouts of coloring sheets produced using multifunction copiers at our stores from March to April 2020. Furthermore, we developed food products using milk intended for school lunches and sea bream produced in Ehime Prefecture, consumption of which decreased due to the COVID-19 crisis, to support local producers across the nation.

10

(2) Profit and Loss

In terms of operating results for the fiscal year, gross operating revenue increased to 666,001 million yen (down 8.8% from previous fiscal year), operating income totaled 40,876 million yen (down 35.1% from previous fiscal year), and ordinary income amounted to 37,610 million yen (down 33.3% from previous fiscal year). Profit attributable to owners of parent was 8,689 million yen (down 56.8% from previous fiscal year).

  1. Overview of Financial Position for the Fiscal Year under Review
  • Total assets, total liabilities, total net assets analysis

Current assets increased by 54,113 million yen from the end of the previous fiscal year to 690,811 million yen, mainly reflecting an increase of 58,997 million yen in cash and deposits and a decrease of 4,283 million yen in current assets-other due to the movement in call loans for banking business. Non-current assets decreased by 46,416 million yen from the end of the previous fiscal year to 674,618 million yen, mainly reflecting decreases of 25,297 million yen in property and store equipment, 10,656 million yen in intangible assets and 10,461 million yen in investments and other assets such as guarantee deposits. Consequently, total assets increased by 7,697 million yen from the end of the previous fiscal year to 1,365,430 million yen.

Current liabilities increased by 205,791 million yen from the end of the previous fiscal year to 767,754 million yen, mainly reflecting increases of 100,000 million yen in current portion of long-term loans payable, 60,979 million yen in current liabilities-other due to the movement in call money for banking business, and 53,014 million yen in deposits received. Non-current liabilities decreased by 195,678 million yen from the end of the previous fiscal year to 324,743 million yen, mainly reflecting a decrease of 180,000 million yen in long-term loans payable. Consequently, total liabilities increased by 10,113 million yen from the end of the previous fiscal year to 1,092,498 million yen.

Net assets decreased by 2,415 million yen from the end of the previous fiscal year to 272,931 million yen, mainly reflecting a decrease of 6,582 million yen in retained earnings and an increase of 1,889 million yen in capital surplus. Consequently, shareholders' equity ratio was 19.6%, down from 20.0% as of the end of the previous fiscal year.

  • Cash flows during fiscal year 2020

Cash and cash equivalents at February 28, 2021 increased by 57,553 million yen from the end of the previous fiscal year to 401,136 million yen.

Net cash provided by operating activities was 227,954 million yen, an increase of 25,250 million yen from the previous fiscal year, mainly because of an increase (decrease) in accounts receivable-other, an increase (decrease) in deposits received and a net decrease (increase) in notes and accounts payable-trade.

Net cash used in investing activities was (29,983) million yen, a decrease of 19,090 million yen from the previous fiscal year, mainly because of a decrease in purchase of property and store equipment, an increase of proceeds from sales of investment securities and a decrease of payments for guarantee deposits.

Net cash used by financing activities was (140,642) million yen, a decrease of 23,268 million yen from the previous fiscal year, mainly because of a net increase (decrease) in short-term loans payable, a decrease in proceeds from long-term loans payable and an increase in repayments of long-term loans payable.

11

(Reference) Trends in cash flow indicators

2018 fiscal year

2019 fiscal year

2020 fiscal year

Shareholders' equity ratio (%)

20.6

20.0

19.6

Shareholders' equity ratio on market value basis (%)

50.3

42.2

36.5

Interest-bearing debt/cash flow ratio (years)

4.7

2.6

1.9

Interest coverage ratio (times)

46.4

50.6

62.3

(Note) Shareholders' equity ratio: Shareholders' equity/Total assets

Shareholders' equity ratio on market value basis: Market capitalization/Total assets

Interest-bearing debt/cash flow ratio: Interest-bearing debt/Cash flow provided by operating activities

Interest coverage ratio: Cash flow provided by operating activities/Interest expense

    1. All indices are calculated using consolidated financial figures.
    2. Market capitalization is calculated by multiply closing share price at the end of fiscal year with the number of shares outstanding at the end of fiscal year (excluding treasury shares)
    3. The figure for net cash provided by operating activities in the consolidated statements of cash flows is used as cash flow provided by operating activities. Interest-bearing debt refers to the sum of all liabilities in the consolidated balance sheets on which interest is paid. The figure for interest paid in the consolidated statements of cash flows is used as interest expense.
  1. Future Outlook

Outlook for the next fiscal year (2021 fiscal year ending February 28, 2022)

1H of 2021 fiscal year

2021 fiscal year

Forecast (Millions of yen)

YoY (%)

Forecast (Millions of yen)

YoY (%)

Gross operating revenue

358,000

110.9

728,000

109.3

Operating income

26,500

158.8

50,000

122.3

Ordinary income

24,500

164.8

45,000

119.6

Profit attributable to

13,000

393.0

13,500

155.4

owners of parent

2. Basic Approach to Selection of Accounting Standards

The Group applies Japanese generally accepted accounting principles, and it has no plan to apply International Financial Reporting Standards (IFRS) for the time being. The Group intends to respond appropriately to the application of the IFRS by considering the situation prevailing in Japan and overseas.

12

3. Consolidated Financial Statements and Main Notes

(1) Consolidated Balance Sheet

As of February 29, 2020 and February 28, 2021

(Millions of yen)

Previous fiscal year

Current fiscal year

As of February 29,

As of February 28,

2020

2021

Assets

Current assets:

Cash and deposits

343,587

402,584

Accounts receivable-due from franchised stores

47,366

46,385

Lease receivables

17,876

16,621

Merchandise

20,985

20,657

Accounts receivable-other

159,122

161,062

Other

47,802

43,519

Allowance for doubtful accounts

(42)

(20)

Total current assets

636,697

690,811

Non-current assets:

Property and store equipment:

Buildings and structures-net

201,526

191,977

Tools, furniture and fixtures-net

20,093

19,044

Land

8,913

8,468

Leased assets-net

146,235

131,779

Construction in progress

1,825

1,818

Other-net

14,343

14,551

Total property and store equipment

392,938

367,640

Intangible assets:

Software

45,151

39,088

Goodwill

42,381

38,215

Trademark right

8,849

8,349

Other

680

752

Total intangible assets

97,063

86,408

Investments and other assets:

Investment securities

28,665

27,624

Long-term loans receivable

42,488

40,621

Guarantee deposits

107,193

103,030

Deferred tax assets

34,378

33,484

Other

18,938

16,474

Allowance for doubtful accounts

(630)

(663)

Total investments and other assets

231,033

220,571

Total non-current assets

721,035

674,618

Total assets

1,357,732

1,365,430

13

(Millions of yen)

Previous fiscal year

Current fiscal year

As of February 29,

As of February 28,

2020

2021

Liabilities

Current liabilities:

Accounts payable-trade

129,397

127,486

Short-term loans payable

39,850

42,320

Current portion of long-term loans payable

100,000

Lease obligations

45,610

44,584

Accounts payable-other

94,848

90,798

Income taxes payable

7,915

4,078

Deposits received

193,096

246,110

Provision for bonuses

4,667

4,818

Other

46,577

107,557

Total current liabilities

561,963

767,754

Non-current liabilities:

Long-term loans payable

310,000

130,000

Lease obligations

136,665

121,491

Deferred tax liabilities

521

485

Provision for retirement benefits to executive officers

282

277

and audit and supervisory board members

Net defined benefit liability

16,245

16,278

Asset retirement obligations

35,335

35,694

Other

21,370

20,516

Total non-current liabilities

520,421

324,743

Total liabilities

1,082,385

1,092,498

Net assets

Shareholders' equity:

Capital stock

58,506

58,506

Capital surplus

44,605

46,494

Retained earnings

165,081

158,498

Treasury shares

(1,011)

(991)

Total shareholders' equity

267,181

262,508

Accumulated other comprehensive income:

Valuation difference on available-for-sale securities

1,496

1,782

Revaluation reserve for land

(207)

(207)

Foreign currency translation adjustments

3,341

3,684

Remeasurements of defined benefit plans

(934)

(134)

Total accumulated other comprehensive income

3,695

5,123

Subscription rights to shares

255

333

Non-controlling interests

4,214

4,965

Total net assets

275,347

272,931

Total liabilities and net assets

1,357,732

1,365,430

14

  1. Consolidated Statement of Income and Consolidated Statement of Comprehensive Income
    Consolidated Statement of Income
    For the fiscal years ended February 29, 2020 and February 28, 2021

(Millions of yen)

Previous fiscal year

Current fiscal year

From March 1, 2019

From March 1, 2020

to February 29, 2020

to February 28, 2021

Gross operating revenue

730,236

666,001

Net sales

302,843

275,945

Cost of sales

205,746

188,441

Gross profit

97,097

87,503

Operating revenue:

Income from franchised stores

314,260

288,480

Other operating revenue

113,132

101,576

Total operating revenue

427,393

390,056

Operating gross profit

524,490

477,559

Selling, general and administrative expenses

461,547

436,682

Operating income

62,943

40,876

Non-operating income: Interest income Dividend income

Share of profit of entities accounted for using equity method

651

729

70

403

571

332

Compensation income

680

490

Employment adjustment subsidy due to novel

793

Other

1,719

1,794

Total non-operating income

3,692

4,544

Non-operating expenses:

Interest expenses

4,006

3,678

Loss on cancellation of leases

3,675

2,065

Expense due to system failure

632

828

Other

1,974

1,238

Total non-operating expenses

10,289

7,810

Ordinary income

56,346

37,610

Extraordinary income:

Gain on sales of investment securities

164

6,232

Total extraordinary income

164

6,232

Extraordinary losses:

Loss on retirement of non-current assets

6,120

3,213

Impairment loss

18,722

16,635

Loss on novel coronavirus disease

3,607

Other

1,348

2,158

Total extraordinary losses

26,191

25,613

Profit before income taxes

30,319

18,230

Income taxes-current

12,814

9,197

Income taxes-deferred

(2,563)

378

Total income taxes

10,250

9,576

Profit

20,068

8,653

Profit attributable to non-controlling interests

(39)

(36)

Profit attributable to owners of parent

20,108

8,689

15

Consolidated Statement of Comprehensive Income

For the fiscal years ended February 29, 2020 and February 28, 2021

(Millions of yen)

Previous fiscal year

Current fiscal year

From March 1, 2019

From March 1, 2020

to February 29, 2020

to February 28, 2021

Profit

20,068

8,653

Other comprehensive income

Valuation difference on available-for-sale securities

(1,852)

285

Foreign currency translation adjustment

(543)

307

Remeasurements of defined benefit plans

(86)

799

Total other comprehensive income

(2,481)

1,392

Comprehensive income

17,586

10,046

Comprehensive income attributable to

Owners of parent

17,579

10,117

Non-controlling interests

7

(71)

16

(3) Consolidated Statement of Changes in Equity

Previous fiscal year ended February 29, 2020 (From March 1, 2019 to February 29, 2020)

(Millions of yen)

Shareholders' equity

Capital stock

Capital surplus

Retained earnings

Treasury shares

Total shareholders' equity

Balance at beginning of current period

58,506

46,984

166,187

(1,028)

270,649

Cumulative effects of changes in

(593)

(593)

accounting policies

Restated balance

58,506

46,984

165,593

(1,028)

270,056

Changes of items during period

Decrease by merger

Change in ownership interest of parent

due to transactions with non-controlling

(2,375)

(2,375)

shareholders

Dividends of surplus

(20,262)

(20,262)

Profit attributable to owners of parent

20,108

20,108

Purchase of treasury shares

(0)

(0)

Disposal of treasury shares

Reversal of revaluation reserve for land

(358)

(358)

Exercise of subscription rights to shares

(3)

18

14

(Delivery of treasury shares)

Net changes of items other than

shareholders' equity

Total changes of items during period

(2,379)

(512)

17

(2,874)

Balance at end of current period

58,506

44,605

165,081

(1,011)

267,181

(Millions of yen)

Accumulated other comprehensive income

Valuation

Foreign

Total

Subscription

Non-

Total net

Revaluation

Remeasureme

accumulated

difference on

currency

controlling

reserve for

nts of defined

other

rights to shares

assets

available-for-sale

translation

interests

land

benefit plans

comprehensive

securities

adjustment

income

Balance at beginning of current

3,349

(566)

3,930

(848)

5,865

215

5,251

281,982

period

Cumulative effects of changes

(593)

in accounting policies

Restated balance

3,349

(566)

3,930

(848)

5,865

215

5,251

281,388

Changes of items during period

Decrease by merger

Change in ownership interest of

parent due to transactions with

(2,375)

non-controlling shareholders

Dividends of surplus

(20,262)

Profit attributable to owners of

20,108

parent

Purchase of treasury shares

(0)

Disposal of treasury shares

Reversal of revaluation reserve

(358)

for land

Exercise of subscription rights

to shares

14

(Delivery of treasury shares)

Net changes of items other

(1,852)

358

(589)

(86)

(2,169)

39

(1,037)

(3,167)

than shareholders' equity

Total changes of items during

(1,852)

358

(589)

(86)

(2,169)

39

(1,037)

(6,041)

period

Balance at end of current period

1,496

(207)

3,341

(934)

3,695

255

4,214

275,347

17

Current fiscal year ended February 28, 2021 (From March 1, 2020 to February 28, 2021)

(Millions of yen)

Shareholders' equity

Capital stock

Capital surplus

Retained earnings

Treasury shares

Total shareholders' equity

Balance at beginning of current period

58,506

44,605

165,081

(1,011)

267,181

Cumulative effects of changes in

accounting policies

Restated balance

58,506

44,605

165,081

(1,011)

267,181

Changes of items during period

Decrease by merger

(262)

(262)

Change in ownership interest of parent

due to transactions with non-controlling

1,886

1,886

shareholders

Dividends of surplus

(15,009)

(15,009)

Profit attributable to owners of parent

8,689

8,689

Purchase of treasury shares

(1)

(1)

Disposal of treasury shares

0

0

0

Reversal of revaluation reserve for land

Exercise of subscription rights to shares

3

21

24

(Delivery of treasury shares)

Net changes of items other than

shareholders' equity

Total changes of items during period

1,889

(6,582)

20

(4,672)

Balance at end of current period

58,506

46,494

158,498

(991)

262,508

(Millions of yen)

Accumulated other comprehensive income

Non-

Subscription

Total net

Total accumulated

Valuation difference

Foreign currency

Remeasurements

controlling

Revaluation

other

rights to shares

assets

on available-for-sale

translation

of defined benefit

interests

reserve for land

comprehensive

securities

adjustment

plans

income

Balance at beginning of current

1,496

(207)

3,341

(934)

3,695

255

4,214

275,347

period

Cumulative effects of changes in

accounting policies

Restated balance

1,496

(207)

3,341

(934)

3,695

255

4,214

275,347

Changes of items during period

Decrease by merger

(262)

Change in ownership interest of

parent due to transactions with

1,886

non-controlling shareholders

Dividends of surplus

(15,009)

Profit attributable to owners of

8,689

parent

Purchase of treasury shares

(1)

Disposal of treasury shares

0

Reversal of revaluation reserve

for land

Exercise of subscription rights

to shares

24

(Delivery of treasury shares)

Net changes of items other than

285

343

799

1,428

78

751

2,257

shareholders' equity

Total changes of items during

285

343

799

1,428

78

751

(2,415)

period

Balance at end of current period

1,782

(207)

3,684

(134)

5,123

333

4,965

272,931

18

(4) Consolidated Statement of Cash Flows

For the fiscal years ended February 29, 2020 and February 28, 2021

(Millions of yen)

Previous fiscal year

Current fiscal year

From March 1, 2019

From March 1, 2020

to February 29, 2020

to February 28, 2021

Net cash provided by (used in) operating activities:

Profit before income taxes

30,319

18,230

Depreciation and amortization

79,183

80,778

Impairment loss

18,722

16,635

Interest income

(651)

(729)

Interest expenses

4,006

3,678

Loss (gain) on sales of investment securities

(164)

(6,232)

Loss on retirement of non-current assets

6,120

3,213

Decrease (increase) in notes and accounts receivable-trade

(205)

992

Decrease (increase) in accounts receivable-other

(38,388)

(1,923)

Increase (decrease) in notes and accounts payable-trade

6,116

(1,952)

Increase (decrease) in accounts payable-other

(7,013)

(4,417)

Increase (decrease) in deposits received

61,292

53,013

Increase (decrease) in net defined benefit liability

783

34

Net decrease (increase) in call loans for banking business

10,000

10,000

Net increase (decrease) in call money for banking business

19,000

21,000

Other-net

28,390

51,511

Subtotal

217,512

243,829

Interest income received

632

704

Interest expenses paid

(4,006)

(3,656)

Income taxes paid

(11,435)

(12,922)

Net cash provided by (used in) operating activities

202,703

227,954

Net cash provided by (used in) investing activities:

Purchase of investment securities

(5,010)

Purchase of property and store equipment

(33,851)

(26,293)

Purchase of intangible assets

(10,931)

(8,471)

Proceeds from sales of investment securities

243

7,792

Purchase of shares of subsidiaries and associates

(2,246)

(1,733)

Payments of long-term loans receivable

(5,960)

(3,675)

Collection of long-term loans receivable

5,735

4,917

Payments for guarantee deposits

(18,023)

(11,832)

Proceeds from collection of guarantee deposits

17,836

16,010

Purchase of long-term prepaid expenses

(796)

(380)

Other-net

(1,079)

(1,305)

Net cash provided by (used in) investing activities

(49,074)

(29,983)

19

(Millions of yen)

Previous fiscal year

Current fiscal year

From March 1, 2019

From March 1, 2020

to February 29, 2020

to February 28, 2021

Net cash provided by (used in) financing activities:

Net increase (decrease) in short-term loans payable

(86,750)

2,470

Proceeds from long-term loans payable

50,000

Repayments of long-term loans payable

(50,000)

(80,000)

Repayments of lease obligations

(53,318)

(50,700)

Proceeds from share issuance to non-controlling shareholders

2,622

Cash dividends paid

(20,262)

(15,009)

Payments from changes in ownership interests in subsidiaries that

(3,521)

do not result in change in scope of consolidation

Other-net

(59)

(25)

Net cash provided by (used in) financing activities

(163,910)

(140,642)

Effect of exchange rate change on cash and cash equivalents

(371)

224

Net increase (decrease) in cash and cash equivalents

(10,652)

57,553

Cash and cash equivalents at beginning of period

354,236

343,583

Cash and cash equivalents at end of period

343,583

401,136

20

  1. Notes to Consolidated Financial Statements (Going Concern Assumption)
    Not Applicable.

(Accounting Policies for the Preparation of Consolidated Financial Statements)

1. Scope of consolidation

  1. Number of consolidated subsidiaries: 20

(Domestic)

Lawson Entertainment, Inc.

BestPractice, Inc.

SCI, Inc.

Lawson Store100, Inc.

Lawson HMV Entertainment United Cinemas Holdings, Inc.

United Entertainment Holdings Co., Ltd.

United Cinemas Co., Ltd.

SEIJO ISHII CO., LTD.

Lawson Bank, Inc.

Lawson urbanworks, Inc.

(Foreign) Chongqing Lawson, Inc.

Shanghai Lawson, Inc.

Dalian Lawson, Inc.

Lawson (China) Holdings, Inc.

Saha Lawson Co., Ltd.

Shanghai Le Song Trading Co., Ltd.

Shang Hai Gong Hui Trading Co., Ltd.

Zhejiang Lawson, Inc.

Beijing Lawson, Inc.

BEIJING LUOSONG Co., Ltd.

Lawson Sanin, Inc. was excluded from the scope of consolidation, because it was dissolved after merging with Lawson, Inc. on March 1, 2020.

  1. Names of nonconsolidated subsidiaries and others
    (Domestic) LAWSONWILL, Inc. Seikaken, Inc.
    SEIJO ISHII SYUHAN CO., LTD. TOKYO EUROPE TRADE CO., LTD.
    LT CO., LTD.
    Lawson Digital Innovation Inc.

(Foreign) Lawson USA Hawaii, Inc. Jiangsu Lawson, Inc. Lawson Philippines, Inc.

LAWSON (TIANJIN) INC. SLV Retail Company Limited Shenyang LAWSON Inc.

(Reasons for exclusion from the scope of consolidation)

The above nonconsolidated subsidiaries have been excluded from the scope of consolidation because they are all small in scale and their total assets, net sales, profit or loss (corresponding to equity interest) and retained earnings (corresponding to equity interest) and others have no material influence on the consolidated financial statements.

21

2. Application of the equity method

(1) Equity-method associates: 3

(Domestic) Lawson Okinawa, Inc. Lawson Minamikyushu, Inc. Lawson Kochi, Inc.

  1. Nonconsolidated subsidiaries and entities excluded from the scope of the equity-method application Nonconsolidated subsidiaries (LAWSONWILL, Inc., Seikaken, Inc., SEIJO ISHII SYUHAN CO., LTD.,

TOKYO EUROPE TRADE CO., LTD., LT CO., LTD., Lawson Digital Innovation Inc., Lawson USA Hawaii, Inc., Jiangsu Lawson, Inc., Lawson Philippines, Inc., LAWSON (TIANJIN) INC., SLV Retail Company Limited and Shenyang LAWSON Inc.) and entities (Double Culture Partners Co., Ltd., Loyalty Marketing, Inc., Lawson Staff, Inc., TA Platform Corporation, LTF Co., Ltd., StageAround TOKYO Production Committee, Jiangyin Hualian Guzhitian Food Co., Ltd., POPLAR Co.,Ltd., New Designed by Tokyo Ltd., Boogie Woogie Entertainment Co., Ltd., TA Platform Software, and Lawson Farm Chiba and others) were excluded from the scope of the equity-method application because their profit or loss (corresponding to equity interest) and retained earnings (corresponding to equity interest) of these entities are not significant either individually or in aggregate to the consolidated financial statements.

3. Fiscal year end of the consolidated subsidiaries

The balance sheet date of Chongqing Lawson, Inc., Shanghai Lawson, Inc., Dalian Lawson, Inc., Lawson (China) Holdings, Inc., Saha Lawson Co., Ltd., Shanghai Le Song Trading Co., Ltd., Shang Hai Gong Hui Trading Co., Ltd., Zhejiang Lawson, Inc., Beijing Lawson, Inc. and BEIJING LUOSONG Co., Ltd. is December 31. In order to prepare the consolidated financial statements, the Company used these companies' financial information prepared as of such balance sheet date and significant transactions which occur between the balance sheet date and the consolidated balance sheet date are adjusted as required for consolidation.

The balance sheet date of Lawson Bank, Inc. is March 31. In formulating the consolidated financial statements, the Company used this subsidiary's provisional settlement of accounts as of the consolidated balance sheet date.

The fiscal year end date for the other consolidated subsidiaries corresponds with the consolidated balance sheet date.

4. Summary of Significant Accounting Policies

(1) Valuation basis and method for significant assets

  • Securities:

Marketable securities and investments in securities:

Available-for-sale securities:

Securities whose market value is readily determinable:

Recorded at market value with net unrealized gains and losses as a separate component of net assets. The cost of securities sold is determined based on the moving-average method.

Other:

Stated at cost determined by the moving-average method.

  • Inventories:

Merchandise:

Stated at cost determined mainly by the retail method (the book value in the balance sheet is written down based on the decline in profitability).

  1. Depreciation method of depreciable significant assets
    • Property and store equipment (except for leased assets):

Mainly computed by the straight-line method.

The ranges of useful lives are from 10 to 34 years for buildings and structures and from 5 to 8 years for tools, furniture and fixtures.

  • Intangible assets (except for leased assets):
    Computed by the straight-line method.
    Costs of software for internal use are amortized by the straight-line method over 5 years, which is the estimated useful life. Furthermore, for right of trademark, amortization is mainly computed using the straight-line method over 20 years.

22

  • Leased assets:

Leased assets related to finance leases that do not transfer ownership of leased property

The Company applies the straight-line method using the lease term as the useful life and a residual value of zero.

  • Rights-of-useassets:

Rights-of-use assets of the Company's foreign consolidated subsidiaries that apply International Financial Reporting Standard 16 (IFRS 16) "Leases"

The Company applies the straight-line method using the lease term as the useful life and a residual value of zero.

  1. Accounting standard for significant reserves
    • Allowance for doubtful accounts:

Allowance for doubtful accounts is provided at the amount of possible losses from uncollectible receivables based on the actual rate of losses from bad debt for ordinary receivables and on estimated recoverability for specific doubtful receivables.

  • Provision for bonuses:

Provision for bonuses is provided for payments of employees' bonuses based on the estimated amounts.

  • Provision for retirement benefits to executive officers and audit & supervisory board members:

Provision for retirement benefits to executive officers of the Company and audit & supervisory board members of consolidated subsidiaries is recorded under internal regulations.

(4) Accounting method for retirement benefits

  • Period attributable method of estimated amount of retirement benefits

In calculating retirement benefit obligation, in order to attribute estimated amount of retirement benefits in the period up to the end of the current fiscal year, it is based on the benefit formula basis.

  • Cost treatment method of actuarial difference and prior service cost

Prior service cost is amortized starting the fiscal year incurred mainly on a straight-line basis over a certain period (10 years) within an average remaining service period of employees at the time of their recognition.

Actuarial differences are mainly amortized from the following fiscal year on a straight-line basis over a certain period (10 years) within an average remaining service period of employees at the time of their recognition.

Certain consolidated subsidiaries apply the simplified method to estimate the amount required for voluntary resignations at the end of the fiscal year as the retirement benefit liability in order to calculate net defined benefit liability and retirement benefit expenses.

(5) Significant foreign currency transactions and foreign currency financial statements

All short-term and long-term monetary receivables and payables denominated in foreign currencies are translated into Japanese yen at the exchange rates at the consolidated balance sheet date. The foreign exchange gains and losses from translation are recognized in the consolidated statement of income. The consolidated balance sheet accounts as well as revenue and expense accounts of foreign subsidiaries and affiliated companies are translated into Japanese yen at the current exchange rate as of the consolidated balance sheet date except for shareholders' equity, which is translated at the historical rate. Differences arising from such translation are shown as "foreign currency translation adjustments" and "non- controlling interests," a separate component of net assets.

(6) Amortization method and period of goodwill

Goodwill is amortized on a straight-line basis over the relevant years, depending on the reason for the occurrence of goodwill, with a maximum of 20 years.

(7) Cash and cash equivalents in the consolidated statement of cash flows

Cash and cash equivalents in the consolidated statement of cash flows include cash on hand, demand deposits and short-term investments due within three months of the acquisition date, which are easily convertible into cash with little risk of value fluctuation.

  1. Other significant items related to the preparation of consolidated financial statements
    • Accounting for consumption tax:

Consumption tax and local consumption tax are accounted for using the tax exclusion method.

  • Adoption of consolidated taxation system:

The Company and certain consolidated subsidiaries in Japan adopt the consolidated taxation system.

23

  • Application of tax effect accounting for transition from consolidated taxation system to group tax sharing system:
    The Company and certain domestic consolidated subsidiaries have calculated the amounts of deferred tax assets and deferred tax liabilities in accordance with tax laws in effect before amendment based on the treatment of Paragraph 3 of "Practical Solution on the Treatment of Tax Effect Accounting for the Transition from the Consolidated Taxation System to the Group Tax Sharing System" (ASBJ Practical
    Issues Task Force No.39, March 31, 2020) instead of applying the provision in Paragraph 44 of
    "Implementation Guidance on Tax Effect Accounting" (ASBJ Guidance No.28, February 16, 2018), regarding the transition to group tax sharing system established in "Act for Partial Amendment of the Income Tax Act, etc." (Act No.8 of 2020), and items for which the non-consolidated taxation system has been reviewed in the line with the transition to the group tax sharing system.

(Unapplied Accounting Standards, etc.)

(The Company and its domestic consolidated subsidiaries)

"Accounting Standard for Revenue Recognition" (ASBJ Statement No. 29; March 30, 2020)

"Implementation Guidance on Accounting Standard for Revenue Recognition" (ASBJ Guidance No. 30; March 30, 2020)

  1. Outline
    This is a comprehensive accounting standard on revenue recognition. Revenue is recognized by applying

the following five steps:

Step 1: Identify the contracts with a customer.

Step 2: Identify the performance obligations in the contract.

Step 3: Determine the transaction price.

Step 4: Allocate the transaction price to the performance obligations in the contract.

Step 5: Recognized revenue when as the entity satisfies a performance obligation.

(2) Scheduled date of application

The Company plans to adopt the accounting standards, etc. from the beginning of the fiscal year ending February 28, 2023.

  1. Impact of the application of the accounting standards, etc.
    The impact was being evaluated at the time of preparation of these consolidated financial statements.

"Accounting Standard for Fair Value Measurement" (ASBJ Statement No.30; July 4, 2019)

"Implementation Guidance on Accounting Standard for Fair Value Measurement" (ASBJ Guidance No. 31; July 4, 2019)

"Accounting Standard for Measurement of Inventories" (ASBJ Statement No. 9; July 4, 2019) "Accounting Standard for Financial Instruments" (ASBJ Statement No. 10; July 4, 2019)

"Implementation Guidance on Disclosures about Fair Value of Financial Instruments" (ASBJ Guidance No.

19; March 31, 2019)

  1. Outline
    To improve comparability with international accounting standards, "Accounting Standard for Fair Value

Measurement" and "Implementation Guidance on Accounting Standard for Fair Value Measurement" (hereinafter, "Accounting Standard for Fair Value Measurement, etc.") have been developed as guidance on how to measure fair value. "Accounting Standard for Fair Value Measurement, etc." will be applied in

determining the fair value of the following items.

Financial instruments set forth in "Accounting Standard for Financial Instruments"

Inventories held for trading purposes set forth "Accounting Standard for Measurement of Inventories"

24

  1. Scheduled date of application
    The Company plans to apply the accounting standards, etc. from the beginning of the fiscal year ending

February 28, 2023.

  1. Impact of the application of the accounting standards, etc.
    The impact was still being evaluated at the time of preparation of these consolidated financial statements.

(Changes in Presentation)

(Consolidated Statement of Income)

In the "Non-operating income" section, "Dividend income" was included in "Other" in the previous fiscal year. In order to enhance the clarity of the consolidated financial statements from the current fiscal year, "Dividend income" is now separately presented.

In the "Non-operating income" section, "Penalty income" was presented separately in the previous fiscal year. Due to a decline in financial materiality, "Penalty income" is now included in "Other." To reflect these changes in method of presentation, the Consolidated Statement of Income for the previous fiscal year has been reclassified.

As a result, in the "Non-operating income" section, 408 million yen that was presented as "Penalty income" and 1,381 million yen that was presented as "Other" in the Consolidated Statement of Income for the previous fiscal year are now presented as 70 million yen of "Dividend income" and 1,719 million yen of "Other."

In the "Non-operating expenses" section, "Expense due to system failure" was included in "Other" in the previous fiscal year. In order to enhance the clarity of the consolidated financial statements from the current fiscal year, "Expense due to system failure" is now separately presented. To reflect these changes in method of presentation, the Consolidated Statement of Income for the previous fiscal year has been reclassified.

As a result, in the "Non-operating expenses" section, 632 million yen that was presented as "Other" in the Consolidated Statement of Income for the previous fiscal year are now presented as "Expense due to system failure."

In the "Extraordinary losses" section, "Loss on sales of non-current assets" was presented separately in the previous fiscal year. Due to a decline in financial materiality, "Loss on sales of non-current assets"is now included in "Other." To reflect these changes in method of presentation, the Consolidated Statement of Income for the previous fiscal year has been reclassified.

As a result, in the "Extraordinary losses" section, 508 million yen that was presented as "Loss on sales of non-current assets" and 840 million yen that was presented as "Other" in the Consolidated Statement of Income for the previous fiscal year is now presented as 1,348 million yen of "Other."

(Consolidated Statement of Cash Flows)

In the "Cash flow from operating activities" section, "Gain on sale of investment securities" was included in "Other" in the previous fiscal year. In order to enhance the clarity of the consolidated financial statements from the current fiscal year, "Gain on sale of investment securities" is now separately presented. To reflect these changes in method of presentation, the Consolidated Statement of Cash Flows for the previous fiscal year has been reclassified.

As a result, in the "Net cash provided by (used in) operating activities" section, (164) million yen that was presented as "Other" in the Consolidated Statement of Cash Flows for the previous fiscal year is now presented as "Gain on sale of investment securities."

25

In the "Cash flow from investing activities" section, "Purchase of investment securities" was presented separately in the previous fiscal year. Due to a decline in financial materiality, "Purchase of investment securities" is now included in "Other." To reflect these changes in method of presentation, the Consolidated Statement of Cash Flows for the previous fiscal year has been reclassified.

As a result, in the "Cash flow from investing activities" section, (129) million yen that was presented as "Purchase of investment securities" and (950) million yen that was presented as "Other" in the Consolidated Statement of Cash Flows for the previous fiscal year is now presented as (1,079) million yen of "Other."

(Notes to Consolidated Balance Sheet)

*1. Accumulated depreciation of property and store equipment

(Millions of yen)

Previous fiscal year

Current fiscal year

As of February 29, 2020

As of February 28, 2021

Accumulated depreciation

366,817

385,891

*2. Investments in associates

(Millions of yen)

Previous fiscal year

Current fiscal year

As of February 29, 2020

As of February 28, 2021

Investment securities (stocks)

18,717

19,257

(Investment amount for jointly-controlled companies)

(956)

(959)

Investment securities (bonds)

68

61

Other (other equity investments)

1,800

1,908

(Investment amount for jointly-controlled companies)

(799)

(302)

*3. Revaluation of land used for business

Land used for business was revalued on the basis prescribed by the Law Concerning Revaluation of Land (Law No. 34, March 31, 1998). The resulting revaluation difference has been included in net assets as "Revaluation reserve for land."

Revaluation method:

The value of land is determined based on the notified prices adjusted reasonably as stipulated in Article 2, Item 4 of the Ordinance Implementing the Law Concerning Revaluation of Land (Government Ordinance No. 119, March 31, 1998) and the assessed value as stipulated in Article 2, Item 5 of the same Ordinance.

Date of revaluation: February 28, 2002

(Millions of yen)

Previous fiscal year

Current fiscal year

As of February 29, 2020

As of February 28, 2021

Difference between book value and market value of

81

53

the revalued land as of balance sheet date

26

*4. Overdraft and loan commitment agreements

The Company and its consolidated subsidiaries have entered into overdraft and loan commitment agreements to ensure efficient funding of working capital.

The unutilized balances of loans under these overdraft and loan commitment agreements as of the end of the fiscal year are as follows.

(Millions of yen)

Previous fiscal year

Current fiscal year

As of February 29, 2020

As of February 28, 2021

Total overdraft limit and loan commitment

220,000

220,000

Amount utilized

3,000

14,070

Unutilized balance

217,000

205,930

*5. Guarantee obligations

The Company guarantees the borrowings from financial institutions of the following subsidiary.

(Millions of yen)

Previous fiscal year

Current fiscal year

As of February 29, 2020

As of February 28, 2021

Lawson Philippines, Inc.

110

(Notes to Consolidated Statement of Income)

*1. Major components of selling, general and administrative expenses are as follows.

(Millions of yen)

Previous fiscal year

Current fiscal year

From March 1, 2019

From March 1, 2020

to February 29, 2020

to February 28, 2021

Employees' salaries and allowances

62,324

58,214

Provision for bonuses

3,860

3,801

Retirement benefit expenses

2,722

2,899

Rents

133,880

128,952

Depreciation

79,069

80,643

*2. Breakdown of loss on retirement of non-current assets

(Millions of yen)

Previous fiscal year

Current fiscal year

From March 1, 2019

From March 1, 2020

to February 29, 2020

to February 28, 2021

Buildings and structures

4,872

2,394

Tools, furniture and fixtures

363

560

Leased assets

867

224

Software

17

32

Others

0

0

Total

6,120

3,213

27

*3. Impairment loss

The Company and its consolidated subsidiaries (collectively, the "Group") identify each store as the smallest cash generating unit.

The carrying value of asset groups whose profitability has significantly decreased was written down to the recoverable amount, with the difference recognized as impairment loss under extraordinary losses.

Previous fiscal year (From March 1, 2019 to February 29, 2020)

(Millions of yen)

Category by use

Location

Assets

Impairment loss

Tokyo

Buildings; tools, furniture and fixtures; and others

2,533

Stores

Osaka

"

1,689

Others

"

13,434

Other

Land

116

Software

947

Total

18,722

Category by non-current assets

Buildings and structures

10,774

million yen

Tools, furniture and fixtures

708

"

Land

116

"

Leased assets

6,104

"

Software

947

"

Other

70

"

The recoverable amount of the asset groups is the higher of net selling price or value in use. The net selling price of land was calculated based on the value appraised by a real estate appraiser or contract price, and the value in use was calculated by discounting estimated future cash flows mainly using a discount rate of 3.8%.

Current fiscal year (From March 1, 2020 to February 28, 2021)

(Millions of yen)

Category by use

Location

Assets

Impairment loss

Tokyo

Buildings; tools, furniture and fixtures; and others

2,626

Stores

Osaka

"

1,264

Others

"

11,845

Other

Land

76

Software

821

Total

16,635

Category by non-current assets

Buildings and structures

9,603

million yen

Tools, furniture and fixtures

563

"

Land

76

"

Leased assets

5,500

"

Software

821

"

Other

70

"

The recoverable amount of the asset groups is the higher of net selling price or value in use. The net selling price of land was calculated based on the value appraised by a real estate appraiser or contract price, and the value in use was calculated by discounting estimated future cash flows mainly using a discount rate of 3.0%.

28

(Notes to Consolidated Statement of Comprehensive Income)

  • The components of other comprehensive income for the years ended February 29, 2020 and February 28, 2021 were as follows:

(Millions of yen)

Previous fiscal year

Current fiscal year

From March 1, 2019

From March 1, 2020

to February 29, 2020

to February 28, 2021

Valuation difference on

available-for-sale securities

Gain or loss arising during the

(2,509)

6,630

period

Reclassification adjustments to

(120)

(6,219)

profit or loss

Amount before income tax effect

(2,630)

410

Income tax effect

778

(125)

Valuation difference on

(1,852)

285

available-for-sale securities

Foreign currency translation

adjustment

Gain or loss arising during the

(543)

307

period

Foreign currency translation

(543)

307

adjustment

Remeasurements of defined

benefit plans

Gain or loss arising during the

(334)

891

period

Reclassification adjustments to

177

260

profit or loss

Amount before income tax

(157)

1,152

effect

Income tax effect

70

(353)

Remeasurements of defined

(86)

799

benefit plans

Total other comprehensive

(2,481)

1,392

income

29

(Notes to Consolidated Statement of Changes in Equity)

Previous fiscal year (From March 1, 2019 to February 29, 2020)

1. Number of shares of outstanding stock and treasury shares

Number of shares at

Increase during

Decrease during

Number of shares at

the beginning of the

the period

the period

the end of the period

period

(thousands of shares)

(thousands of shares)

(thousands of shares)

(thousands of shares)

Outstanding stock

Common stock

100,300

100,300

Treasury shares

Common stock (*)

241

0

4

237

(*)The increase in treasury

shares of 0 thousand shares resulted from purchases of stock of less than one share unit.

The decrease in treasury shares of 4 thousand shares resulted from the exercise of stock option rights.

2. Subscription rights to shares and treasury subscription rights to shares

Class and number of shares

Balance at

subject to stock acquisition rights

end of the

Classification

Terms of stock

Number (shares)

current

acquisition rights

Class

Beginning

Increase

Decrease

End of the

period

of the

during the

during the

period

(Millions

period

period

period

of yen)

Issuing company

Stock acquisition

rights (ordinary stock

255

(Parent company)

options)

Total

255

3. Dividend

1) Dividend payment

Date of resolution

Class of

Dividend payment

Dividend per

Record date

Effective date

shares

(millions of yen)

share (yen)

The General meeting

Common

of shareholders

12,757

127.50

February 28, 2019

May 22, 2019

stock

(May 21, 2019)

Directors' meeting

Common

7,504

75.00

August 31, 2019

November 8, 2019

(October 9, 2019)

stock

2) Dividends for which the record date is in the current fiscal year and the effective date is after the fiscal year-end

Date of resolution

Class of

Source of

Dividend payment

Dividend per

Record date

Effective

shares

dividend

(millions of yen)

share (yen)

date

The General

meeting of

Common

Retained

7,504

75.00

February 29,

May 28,

shareholders

stock

earnings

2020

2020

(May 27, 2020)

30

Current fiscal year (From March 1, 2020 to February 28, 2021)

1. Number of shares of outstanding stock and treasury shares

Number of shares at

Increase during

Decrease during

Number of shares at

the beginning of the

the period

the period

the end of the period

period

(thousands of shares)

(thousands of shares)

(thousands of shares)

(thousands of shares)

Outstanding stock

Common stock

100,300

100,300

Treasury shares

Common stock (*)

237

0

5

232

  1. The increase in treasury shares of 0 thousand shares resulted from purchases of stock of less than one share unit. The decrease in treasury shares of 5 thousand shares resulted from decreases of 5 thousand shares due to the exercise of stock option rights and 0 thousand shares due to requests for additional purchases of stock of less than one share unit.

2. Subscription rights to shares and treasury subscription rights to shares

Class and number of shares

Balance at

subject to stock acquisition rights

end of the

Classification

Terms of stock

Number (shares)

current

acquisition rights

Class

Beginning

Increase

Decrease

End of the

period

of the

during the

during the

period

(Millions

period

period

period

of yen)

Issuing company

Stock acquisition

rights (ordinary stock

333

(Parent company)

options)

Total

333

3. Dividend

1) Dividend payment

Date of resolution

Class of

Dividend payment

Dividend per

Record date

Effective date

shares

(millions of yen)

share (yen)

The General meeting

Common

of shareholders

7,504

75.00

February 29, 2020

May 28, 2020

stock

(May 27, 2020)

Directors' meeting

Common

7,505

75.00

August 31, 2020

November 10, 2020

(October 8, 2020)

stock

  1. Dividends for which the record date is in the current fiscal year and the effective date is after the fiscal year-end Plan for resolution is as follows.

Date of resolution

Class of

Source of

Dividend payment

Dividend per

Record date

Effective

shares

dividend

(millions of yen)

share (yen)

date

The General

meeting of

Common

Retained

7,505

75.00

February 28,

May 26,

shareholders

stock

earnings

2021

2021

(May 25, 2021)

31

(Notes to Consolidated Statement of Cash Flows)

*1. Reconciliation between the year-end balance of cash and cash equivalents and cash and deposits in the consolidated balance sheet

(Millions of yen)

Previous fiscal year

Current fiscal year

From March 1, 2019

From March 1, 2020

to February 29, 2020

to February 28, 2021

Cash and deposits

343,587

402,584

Time deposits for which the deposit period

(4)

(1,447)

exceeds three months

Cash and cash equivalents

343,583

401,136

2. Description of significant non-cash transactions

1) Assets and liabilities related to finance lease transactions are as follows.

(Millions of yen)

Previous fiscal year From March 1, 2019 to February 29, 2020

Current fiscal year From March 1, 2020 to February 28, 2021

Assets and liabilities related to finance lease

50,007

31,841

transactions

(*)The Company's foreign consolidated subsidiaries apply International Financial Reporting Standard 16 (IFRS 16) "Leases" and the lease transactions concluded by those subsidiaries are included in the description above of the amount of assets and liabilities related to finance lease transactions.

2) Significant asset retirement obligations are as follows.

(Millions of yen)

Previous fiscal year From March 1, 2019 to February 29, 2020

Current fiscal year From March 1, 2020 to February 28, 2021

Significant asset retirement obligations

5,363

916

32

(Segment Information)

1. Outline of reportable segments

1) Method to determine reportable segments

The Company's financial information is provided separately by reportable segment and is subject to regular review by the board of directors with regard to the allocation of managerial resources and performance evaluation.

The Group operates primary businesses Domestic Convenience Store Business, Seijo Ishii Business, Entertainment-related Business, Financial Services Business and Overseas Business while incorporating other related businesses.

Therefore, the Group has made the Domestic Convenience Store Business, Seijo Ishii Business, Entertainment-related Business, Financial Services Business and Overseas Business units its main reportable segments, based on consideration of financial characteristics and the nature of the services provided.

Regarding Domestic Convenience Store Business, Lawson, Inc. operates a franchise system as well as undertaking the direct management of stores in Japan as the parent company of LAWSON, NATURAL LAWSON, and LAWSON STORE100. Lawson urbanworks, Inc. undertakes the direct management of LAWSON stores mainly in Tokyo and Chiba prefectures. Lawson Store100, Inc. undertakes the direct management of LAWSON STORE100 stores. SCI, Inc., a functional subsidiary which comprehensively manages the process from procurement to sale, aims to improve the efficiency of the entire process.

Regarding Seijo Ishii Business, SEIJO ISHII CO., LTD. operates SEIJO ISHII supermarkets.

Regarding Entertainment-related Business, Lawson Entertainment, Inc. conducts the management and sales of concert tickets at LAWSON stores and others, music and video software products at HMV stores and others. In addition, United Cinemas Co., Ltd. operates multiplex movie theatres.

Regarding Financial Services Business, Lawson Bank, Inc. carries out a banking business.

Regarding Overseas Business, the Group's operating companies opened LAWSON stores in the People's Republic of China and Thailand.

2) Changes in reportable segments

Due to its increased importance, Overseas Business, which was included in Others, has been recorded as a single reporting segment from the current fiscal year. As a result, segment information for the previous fiscal year was reclassified to reflect the change and presented in "3. Information on net sales, and profit or loss by reportable segment."

2. Computation method of the amount of net sales, profit or loss, assets and liabilities, and other items by reportable segment

The segment accounting policies are the same as those described in the "Accounting Policies for the Preparation of Consolidated Financial Statements." Segment profit is based on operating income. Intersegment revenue and transfers are based on market value.

33

3. Information on net sales, and profit or loss by reportable segment Previous fiscal year (From March 1, 2019 to February 29, 2020)

(Millions of yen)

Reportable segment

Others

Total

Adjustments

Total

Domestic

Financial

(Note 1)

(Note 2)

(Note 3)

Convenience

Seijo Ishii

Entertainment-

Overseas

Services

Store

Business

related Business

Business

Business

Business

Gross operating

Revenue

Sales to

external

465,333

93,119

83,960

31,646

56,169

7

730,236

730,236

customers

Internal sales

or transfers

6,218

1,385

2,443

1,098

11,145

(11,145)

between

segments

Total

471,551

93,119

85,346

34,089

56,169

1,106

741,382

(11,145)

730,236

Segment profit

47,121

8,348

5,313

3,088

(1,005)

76

62,943

62,943

Segment assets

908,974

71,903

69,736

395,854

42,112

384

1,488,965

(131,232)

1,357,732

Other

Depreciation

57,755

1,887

2,365

6,401

6,333

0

74,743

74,743

Amortization

2,443

1,437

501

57

4,440

4,440

of goodwill

Investments in

5,099

5,099

5,099

Associates

Increase in

non-current

33,165

1,045

2,771

2,586

5,213

44,782

44,782

assets

(Notes)

  1. The business segments within the "Others" category that do not fall under the main reportable segments, include Consulting Business.
  2. Adjustments to segment assets are due to the elimination of intra-segment transactions.
  3. Segment profit (loss) corresponds to consolidated operating income.

34

Current fiscal year (From March 1, 2020 to February 28, 2021)

(Millions of yen)

Reportable segment

Others

Total

Adjustments

Total

Domestic

Financial

(Note 1)

(Note 2)

(Note 3)

Convenience

Seijo Ishii

Entertainment-

Overseas

Services

Store

Business

related Business

Business

Business

Business

Gross operating

Revenue

Sales to

external

416,436

103,037

56,592

28,575

61,356

2

666,001

666,001

customers

Internal sales

or transfers

6,064

1,317

2,997

207

10,586

(10,586)

between

segments

Total

422,501

103,037

57,909

31,573

61,356

210

676,588

(10,586)

666,001

Segment profit

28,739

10,329

(297)

1,753

809

(456)

40,876

40,876

Segment assets

881,172

73,382

53,785

450,973

56,703

508

1,516,526

(151,095)

1,365,430

Other

Depreciation

57,712

1,975

2,301

6,974

7,641

76,606

76,606

Amortization

2,179

1,437

501

53

4,171

4,171

of goodwill

Investments in

4,942

4,942

4,942

Associates

Increase in

non-current

25,827

1,542

885

2,456

4,053

34,764

34,764

assets

(Notes)

  1. The business segments within the "Others" category that do not fall under the main reportable segments, include Consulting Business.
  2. Adjustments to segment assets are due to the elimination of intra-segment transactions.
  3. Segment profit (loss) corresponds to consolidated operating income.

35

(Related information)

Previous fiscal year (From March 1, 2019 to February 29, 2020)

  1. Information by product and service
    Since similar information is disclosed in segment information, this information is omitted.
  2. Information by geographical area
  1. Net sales

Since sales to external customers in Japan exceed 90% of net sales on the consolidated statement of income, this information is omitted.

(2) Property and store equipment

Since property and store equipment in Japan exceed 90% of property and store equipment on the consolidated balance sheet, this information is omitted.

3. Information by major customer

Information about major customers has been omitted since there are no external customers who constituted more than 10% of net sales on the consolidated statement of income.

Current fiscal year (From March 1, 2020 to February 28, 2021)

  1. Information by product and service
    Since similar information is disclosed in the segment information, this information is omitted.
  2. Information by geographical area
  1. Net sales

Since sales to external customers in Japan exceed 90% of net sales on the consolidated statement of income, this information is omitted.

(2) Property and store equipment

Since property and store equipment in Japan exceed 90% of property and store equipment on the consolidated balance sheet, this information is omitted.

3. Information by major customer

Information about major customers has been omitted since there are no external customers who constituted more than 10% of net sales on the consolidated statement of income.

36

(Information on impairment loss on non-current assets by reportable segment) Previous fiscal year (From March 1, 2019 to February 29, 2020)

The Group identifies each store as the smallest cash generating unit.

Regarding asset groups whose profitability from operating activities has continuously been negative, the book value of such assets has been written down to the recoverable amount, with the difference recorded as impairment loss under extraordinary losses.

The amount of impairment loss recorded for each reportable segment is as follows.

(Millions of yen)

Reportable segment

Others

Total

Adjustments

Total

Domestic

Seijo

Entertain

Financial

Convenience

ment-

Overseas

Ishii

Services

Store

related

Business

Business

Business

Business

Business

Impairment

18,359

17

73

272

18,722

18,722

loss

Current fiscal year (From March 1, 2020 to February 28, 2021)

The Group identifies each store as the smallest cash generating unit.

Regarding asset groups whose profitability from operating activities has continuously been negative, the book value of such assets has been written down to the recoverable amount, with the difference recorded as impairment loss under extraordinary losses.

The amount of impairment loss recorded for each reportable segment is as follows.

(Millions of yen)

Reportable segment

Others

Total

Adjustments

Total

Domestic

Seijo

Entertain

Financial

Convenience

ment-

Overseas

Ishii

Services

Store

related

Business

Business

Business

Business

Business

Impairment

16,206

196

142

89

16,635

16,635

loss

(Information on amortization of goodwill and amortized balance by reportable segment)

Previous fiscal year (From March 1, 2019 to February 29, 2020)

(Millions of yen)

Reportable segment

Others

Total

Adjustments

Total

Domestic

Seijo

Entertain

Financial

Convenience

ment-

Overseas

Ishii

Services

Store

related

Business

Business

Business

Business

Business

Balance at

13,654

20,958

7,185

583

42,381

42,381

end of fiscal

year

Note: Regarding amortization of goodwill, this information is omitted since similar information is disclosed in segment information.

37

Current fiscal year (From March 1, 2020 to February 28, 2021)

(Millions of yen)

Reportable segment

Others

Total

Adjustments

Total

Domestic

Seijo

Entertain

Financial

Convenience

ment-

Overseas

Ishii

Services

Store

related

Business

Business

Business

Business

Business

Balance at

11,475

19,521

6,683

534

38,215

38,215

end of fiscal

year

Note: Regarding amortization of goodwill, this information is omitted since similar information is disclosed in segment information.

(Information on gain on negative goodwill by reportable segment) Previous fiscal year (From March 1, 2019 to February 29, 2020)

Not applicable.

Current fiscal year (From March 1, 2020 to February 28, 2021) Not applicable.

38

(Per Share Information)

Previous fiscal year

Current fiscal year

From March 1, 2019 to

From March 1, 2020 to

February 29, 2020

February 28, 2021

Net assets per share

2,707.08 yen

2,674.53 yen

Profit per share

200.95 yen

86.84 yen

Diluted profit per share

200.84 yen

86.78 yen

Note: The basis for the calculation of profit per share and diluted profit per share is as follows:

Previous fiscal year

Current fiscal year

Item

From March 1, 2019 to

From March 1, 2020 to

February 29, 2020

February 28, 2021

Profit per share

Profit attributable to owners of parent (millions of

20,108

8,689

yen)

Amount not attributable to common shareholders

(millions of yen)

Profit attributable to common stock (millions of yen)

20,108

8,689

Average number of common stock during the fiscal

100,061

100,065

year (thousands of shares)

Diluted profit per share

Profit attributable to owners of parent adjustment

(millions of yen)

Increase in number of outstanding common shares

58

69

(thousands of shares)

(Subscription rights to shares) (thousands of shares)

(58)

(69)

Summary of issuable shares not included in the

computation of diluted profit per share, since these

securities are not dilutive

(Significant Subsequent Events)

Not applicable.

39

Disclaimer

Lawson Inc. published this content on 08 April 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 08 April 2021 06:03:08 UTC.


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Sadanobu Takemasu President & Representative Director
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