ローソン（2651） – Flash Report on the Consolidated Financial Results for the Fiscal Year Ended February 28, 2022

Flash Report on the Consolidated Financial Results for the Fiscal Year Ended February 28, 2022 April 11, 2022 Listed Company Name: Lawson, Inc. Tokyo Stock Exchange Code No.: 2651 (URL https://www.lawson.jp/en/ir) Company Representative: Sadanobu Takemasu, President and CEO, Representative Director, Contact: Tomoki Takanishi, Senior Vice President, Financial Administration Division Director Chairman of the Board Tel.: +81-3-5435-2773 Scheduled date for the ordinary general meeting of shareholders: May 25, 2022 Scheduled date for submission of annual securities report: May 26, 2022 Scheduled date for payment of dividend: May 26, 2022 Supplementary materials for annual financial results: Yes Holding of presentation of annual results: Yes (for institutional investors and analysts) 1. Consolidated operating results for 2021 fiscal year (from March 1, 2021 to February 28, 2022) (1) Consolidated operating results (cumulative) Note: Percentages represent increases (decreases) compared with the previous fiscal year. (Amounts less than one million yen are truncated) For the fiscal year ended February 28, 2022 February 28, 2021 Note: Comprehensive income: Gross operating revenue Operating income Ordinary income Millions of yen 698,371 666,001 % 4.9 (8.8) Millions of yen 47,096 40,876 % 15.2 (35.1) Millions of yen 47,571 37,610 % 26.5 (33.3) Profit attributable to owners of parent Millions of yen 17,900 8,689 106.0 (56.8) % Fiscal year ended February 28, 2022 Fiscal year ended February 28, 2021 20,613 million yen 10,046 million yen 105.2 % (42.9)% Profit per share For the fiscal year ended February 28, 2022 February 28, 2021 Yen 178.87 86.84 Diluted profit per share Yen 178.71 86.78 Return on equity Ratio of ordinary income to total assets % 6.6 3.2 % 3.5 2.8 Ratio of operating income to gross operating revenue % 6.7 6.1 Reference: Share of profit of entities accounted for using equity method: (2) Consolidated financial position Fiscal year ended February 28, 2022 Fiscal year ended February 28, 2021 50 million yen 332 million yen Total assets Net assets As of Millions of yen Millions of yen February 28, 2022 February 28, 2021 1,337,245 1,365,430 278,473 272,931 Reference: Shareholders’ equity: Shareholders’ equity ratio % 20.4 19.6 Net assets per share Yen 2,726.97 2,674.53 As of February 28, 2022 272,891 million yen As of February 28, 2021 267,632 million yen (3) Consolidated cash flows Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Millions of yen (51,781) (29,983) Net cash provided by (used in) financing activities Millions of yen (109,516) (140,642) Cash and cash equivalents at end of period Millions of yen 388,444 401,136 For the fiscal year ended Millions of yen February 28, 2022 February 28, 2021 146,644 227,954 2. Dividends Annual dividends per share 1Q 1H 3Q Year-end Total Yen Yen Yen Yen Yen 2020 fiscal year － 75.00 － 75.00 － 75.00 75.00 150.00 150.00 2021 fiscal year － 2022 fiscal year (forecast) － 75.00 － 75.00 150.00 Total dividends for the year Millions of yen 15,010 15,010 Payout ratio % 172.7 83.9 68.2 Ratio of dividends to shareholders’ equity % 5.6 5.6 3. Forecast of consolidated operating results for 2022 fiscal year (from March 1, 2022 to February 28, 2023) Note: Percentages represent increases (decreases) compared with the previous fiscal year. Operating income Ordinary income Gross operating revenue % Millions of yen 510,000 46.2 1,024,000 46.6 Millions of yen 27,500 53,000 % 3.0 12.5 Millions of yen 26,000 48,500 % (6.6) 2.0 Profit attributable to owners of parent Millions of yen 13,500 22,000 (22.4) 22.9 % Profit per share Yen 134.90 219.84 1H of 2022 fiscal year 2022 fiscal year Note: Forecast of consolidated operating results for 2022 fiscal year (from March 1, 2022 to February 28, 2023) is based on figures after applying the “Accounting Standard for Revenue Recognition” (ASBJ Statement No.29, March 31, 2020). 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 (2) 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 (3) Number of shares outstanding (common stock) 1. Number of shares outstanding at the end of year (including treasury shares) As of February 28, 2022: 100,300,000 As of February 28, 2021: 100,300,000 As of February 28, 2022: 100,070,561 As of February 28, 2021: 100,065,840 As of February 28, 2021: 232,954 2. Number of treasury shares at the end of year 228,807 As of February 28, 2022: 3. Average number of shares during the year Reference: Non-consolidated operating results for 2021 fiscal year (from March 1, 2021 to February 28, 2022) Non-consolidated operating results (cumulative) Note: Percentages represent increases (decreases) compared with the previous fiscal year. Gross operating revenue Operating income Ordinary income For the fiscal year ended February 28, 2022 February 28, 2021 Millions of yen 355,102 354,825 % Millions of yen 25,870 0.1 (9.2) 26,150 % (1.1) (41.5) Millions of yen 34,278 33,700 % 1.7 (26.7) 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. Profit attributable to owners of parent Millions of yen 13,470 15,894 (15.3) 2.6 % Contents 1. Overview of Operating Results ……………………………………………………………………………………………… (1) Overview of Operating Results for the Fiscal Year under Review ………………………………………… (2) Profit and Loss ………………………………………………………………………………………………………………. (3) Overview of Financial Position for the Fiscal Year under Review ………………………………………… (4) Future Outlook ………………………………………………………………………………………………………………. 2. Basic Approach to Selection of Accounting Standards ……………………………………………………………… 3. Consolidated Financial Statements and Main Notes …………………………………………………………………. (1) Consolidated Balance Sheet …………………………………………………………………………………………….. (2) Consolidated Statement of Income and Consolidated Statement of Comprehensive Income …….. Consolidated Statement of Income ……………………………………………………………………………………. Consolidated Statement of Comprehensive Income …………………………………………………………….. (3) Consolidated Statement of Changes in Equity ……………………………………………………………………. (4) Consolidated Statement of Cash Flows ……………………………………………………………………………… (5) Notes to Consolidated Financial Statements ………………………………………………………………………. (Going Concern Assumption) …………………………………………………………………………………………… (Accounting Policies for the Preparation of Consolidated Financial Statements) …………………….. (Unapplied Accounting Standards, etc.) ………………………………………………………………………………………………… (Changes in Presentation) ………………………………………………………………………………………………… (Notes to Consolidated Balance Sheet) ……………………………………………………………………………… (Notes to Consolidated Statement of Income) …………………………………………………………………….. (Notes to Consolidated Statement of Comprehensive Income) ……………………………………………… (Notes to Consolidated Statement of Changes in Equity) …………………………………………………….. (Notes to Consolidated Statement of Cash Flows) ………………………………………………………………. (Segment Information) ……………………………………………………………………………………………………. (Per Share Information) …………………………………………………………………………………………………… (Significant Subsequent Events) ……………………………………………………………………………………….. 2 2 11 11 12 12 13 13 15 15 16 17 19 21 21 21 24 25 26 28 30 31 33 34 40 40 1 year). 1. Overview of Operating Results (1) Overview of Operating Results for the Fiscal Year under Review During the fiscal year under review, or fiscal 2021 ended February 28, 2022, we continued to take rigorous prevention measures against the infection of the novel coronavirus and responded to new normal demand by exerting concerted Group-wide efforts. Specifically, under the leadership of our Lawson Group Sweeping Transformation Executive Committee, which was launched in September 2020 to realize “Challenge 2025” formulated for 2025, the 50th anniversary of our establishment, we renovated our stores and revamped our product lineups in Domestic Convenience Store Business in response to changes in the business environment, and the whole Lawson Group endeavored to resolve medium- to long-term issues for sustainable growth, acquire new revenue opportunities and foster job satisfaction. As a result, for fiscal 2021 on a consolidated basis, gross operating revenue increased to 698,371 million yen (up 4.9% from previous fiscal year), operating income increased to 47,096 million yen (up 15.2% from previous fiscal year) and ordinary income increased to 47,571 million yen (up 26.5% from previous fiscal year). Profit attributable to owners of parent increased to 17,900 million yen (up 106.0% from previous fiscal We also focused on improving our group-wide internal control system and addressing operating risks based on the 2021 Basic Policy for Improvement of Internal Control Systems. We will continue promoting internal control going forward. In addition, with a view to promoting the Sustainable Development Goals (SDGs) and focusing on environmental, social and governance (ESG) practices in management, we established the Lawson Group Human Rights Policy and Lawson Group Sustainability Policy in June and August 2021, respectively, and revised the Lawson Group Environmental Policy in August. Operating results by business segment were as follows. (Domestic Convenience Store Business) During the fiscal year under review, the number of new COVID-19 cases increased, resulting in a state of emergency or quasi-emergency being declared in many prefectures, while vaccinations by municipalities and workplaces progressed. During the first half of the fiscal year, legal and voluntary restrictions were imposed on a variety of social activities, but in the second half, new infection cases started decreasing in October 2021, leading to the nationwide lifting of the state of emergency or quasi-emergency, an easing of restrictions on social activities, and a recovery trend in the movement of people. However, in January 2022, the movement of people started showing a decreasing trend again due to the rapid spread of the Omicron variant. Under such circumstances, Lawson has been proceeding with store renovations in line with the business environment surrounding each store, helping them expand their merchandise assortment of frozen foods and other daily necessities to adapt to changes in customers’ lifestyles and better address customer needs. We renovated 2,636 stores in the fourth quarter, completing the refurbishment of 4,305 stores by the end of the fiscal year. Installation of the Machikado Chubo in-store kitchen service at stores also progressed, with 8,359 stores equipped with the service as of the end of February 2022. In store operation, we are striving to establish LAWSON stores as convenience stores endorsed by all our 2 customers. To this end, we are implementing measures to achieve our three commitments, namely, to pursue compelling taste, to be considerate to people, and to be environmentally friendly. In addition to further strengthening our distinctive products that focus on taste and health, we are also working to provide heartfelt customer service in our stores, and to strictly address environmental concerns such as reducing food loss, plastic usage, and CO2 emissions, etc. We adopted an AI-based system that prompts stores to make timely discounts by providing reminders as part of our efforts to reduce food loss, conducted a pilot experiment on optimizing store delivery routes by using AI to reduce CO2 emissions, and started selling food by weight at NATURAL LAWSON stores to reduce plastic. [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. In our efforts to respond to customer needs and increase sales, we also focused on expanding our merchandise assortment to respond to changes in consumer lifestyles and values. Furthermore, we kept up our initiatives to increase the profitability of franchise stores, including helping them streamline their store operation and reduce costs associated with food waste and utility expenses. [Merchandising and Service Strategies] Sales continued to surge in fresh foods, frozen foods, daily delivered foods, room temperature Japanese/Western desserts, and alcoholic beverages, whose assortments we have been endeavoring to expand with the aim of supporting the daily lives of customers. In the frozen food range, sales strengthened as a result of expanding our merchandise assortment in phases from November 2021 by developing groundbreaking items such as frozen dessert, as well as capturing customer needs for stocking up on ingredients and ready-made dishes. In the rice range, our “Korega BENTO” box lunch series, which was revamped into a long-lasting chilled range in March 2021, continued to record steady sales throughout the fiscal year under review, and our “Kinshari Onigiri Rice Ball” series also enjoyed robust sales along with the modified regular lineup of onigiri rice balls. Our original products consecutively became huge hits, exemplified by “Nama Gateau Chocolat,” our new dessert product, and “Pari Chiki,” our new fast-food counter item, launched in September and October 2021, respectively. Partly owing to customers having fewer opportunities to go out, the Machikado Chubo in-store kitchen service enjoyed especially strong demand for items its products with established popularity including the “Thick-Sliced Sangenton Pork Cutlet Sandwich,” and items offered in collaboration with food service companies that provide delicious dishes from specialty restaurants as well as the “Local Bowl” series that responds to regional needs. Regarding food delivery services, we started offering “Demae-can” in February 2022 in addition to the five services we already provide including Uber Eats, which was provided by Lawson for the first time in the convenience store sector. As a result, the combined number of stores listed on food delivery services reached 2,903 in 45 prefectures as of February 28, 2022. In addition, Uber Eats delivers over-the-counter (OTC) drugs sold at 71 LAWSON stores in 14 prefectures. 3 [Breakdown of Sales by Merchandise Category at Chain Stores in Domestic Convenience Store Business] Fiscal year Product group Processed foods Fast foods Daily delivered foods Nonfood products Total [Store Development] Previous fiscal year From March 1, 2020 to February 28, 2021 Current fiscal year From March 1, 2021 to February 28, 2022 YoY(%) Sales Percentage Sales Percentage (Millions of yen) of total (%) (Millions of yen) of total (%) 1,156,760 462,497 343,772 202,788 53.4 21.3 15.9 9.4 1,190,886 480,260 343,668 197,166 53.9 21.7 15.5 8.9 2,165,818 100.0 2,211,981 100.0 103.0 103.8 100.0 97.2 102.1 In opening new stores, the Group continued to focus on developing profitable stores. During the fiscal year under review, the total number of LAWSON, NATURAL LAWSON and LAWSON STORE100 stores opened in Japan stood at 483 stores. Meanwhile, we closed a total of 303. As of the end of February 2022, the total number of domestic stores was 14,656 *1. Based on the joint business agreement concluded with POPLAR Co., Ltd. in September 2020, we converted 122 stores from its brand to the LAWSON POPLAR or LAWSON brand stores from this year. Based on the comprehensive business alliance entered into with H2O Retailing Corporation in May 2021, Lawson converted 97 station stores and convenience stores operated by asnas Co., Ltd., an H2O Retailing Corporation Group company, from “asnas” stores into LAWSON stores. 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 280 stores (includes 49 pharmacy LAWSON stores equipped with drug-dispensing pharmacies) as of the end of February 2022. Moreover, the number of stores offering nursing care consultation services has reached 22 as of the end of February 2022. Furthermore, we have also been expanding our chain of “in-hospital LAWSON stores,” which feature strengthened focus on medical, sanitary, nursing and rehabilitation supplies in addition to merchandise and services offered at standard convenience stores. The number of such stores has reached 337 as of the end of February 2022. 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. Our NATURAL LAWSON stores, which are popular particularly among female customers for supporting their beauty, health, and comfortable lifestyles, marked their 20th anniversary in July 2021. NATURAL LAWSON stores offer an exclusive selection of finely picked items of value, including food made with healthy ingredients and environmentally friendly detergents and cosmetics. Meanwhile, our LAWSON STORE100 stores offer high quality, safe and reliable fruits and vegetables with a focus on freshness and daily necessities, supporting customers’ daily dietary lives by helping them plan their meals. 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 2022, we operate 136 NATURAL LAWSON stores and 669 LAWSON STORE100 stores. 4 *1 The numbers of store openings and closings and total number of stores in Japan include stores operated by Lawson, Inc. and three equity-method affiliates, Lawson Kochi, Inc., Lawson Minamikyushu, Inc. and Lawson Okinawa, Inc. [Change in the Total Number of Domestic Stores] LAWSON NATURAL LAWSON LAWSON STORE100 Total Total stores as of Change during Total stores as of February 28, 2021 fiscal year February 28, 2022 13,654 143 679 14,476 197 (7) (10) 180 13,851 136 669 14,656 [Number of LAWSON stores by prefecture (As of February 28, 2022)] Prefecture Prefecture Prefecture Prefecture Number of stores Number of stores Number of stores Number of stores Hokkaido Aomori Akita Iwate Miyagi Yamagata Fukushima Niigata Tochigi Gunma Saitama Chiba 675 279 Ibaraki Tokyo 217 Kyoto 1,683 Shiga 329 154 Ehime Tokushima 182 Kanagawa 1,077 Nara 138 Kochi 178 Shizuoka 275 Wakayama 153 Fukuoka 255 Yamanashi 137 Osaka 1,175 Saga 112 Nagano 174 Hyogo 698 Nagasaki 170 Aichi 226 Gifu 197 Mie 244 692 600 Ishikawa Toyama Fukui 717 Okayama 235 Oita 181 Hiroshima 297 Kumamoto 136 Yamaguchi 127 Miyazaki 103 181 Tottori Shimane 136 Kagoshima 141 Okinawa 107 Kagawa 132 Total(domestic) 14,656 212 135 138 529 75 125 197 161 109 202 260 (Note) These figures include stores operated by Lawson, Inc. and equity-method affiliates, Lawson Kochi, Inc., Lawson Minamikyushu, Inc. and Lawson Okinawa, Inc. As a result, Domestic Convenience Store Business posted gross operating revenue of 424,567 million yen (up 0.5% from previous fiscal year) and segment profit of 28,396 million yen (down 1.2% from previous fiscal year). (Seijo Ishii Business) Seijo Ishii provides customers with well-selected, safe, and reliable foods under its philosophy of “Quality food for a quality life.” Operating diverse store formats including street-side stores and stores in station buildings and commercial facilities, the supermarket chain leverages its distinguished product development expertise to offer original products and food items made in-house under the Seijo Ishii brand. The number of directly operated Seijo Ishii stores reached 169 as of the end of February 2022. Until the end of the first half of the fiscal year, street-side stores, which captured the demand that would have been fulfilled by supermarkets had it not been for the intermittent declarations of states of emergency. In the second half of the fiscal year, after the state of emergency was lifted in October 2021, sales growth slowed mainly at street- 5 side stores primarily due to a decrease in demand from stay-at-home customers. Product wise, dishes produced in-house at our central kitchen continued to enjoy robust sales driven by a range of measures. We will continue striving to elevate the brand power of Seijo Ishii by promoting the sustainable development of products of value, effective promotional campaigns, and publicity activities as a manufacturing retailer eager to send messages out to consumers. As a result, Seijo Ishii Business posted gross operating revenue of 108,632 million yen (up 5.4% from previous fiscal year) and segment profit of 11,240 million yen (up 8.8% from previous fiscal year). (Entertainment-related Business) In our Entertainment-related Business undertaken by Lawson Entertainment, Inc., a large number of events were postponed, cancelled or restricted in terms of the number of admissions in the first half of the fiscal year as a result of the declaration of states of emergency and quasi-emergency. In the second half, however, as the states of emergency and quasi-emergency were lifted in October 2021, concerts began to be staged, which led to a recovery trend. In January 2022, a state of quasi-emergency was issued in response to the spread of the Omicron variant, adversely affecting our business environment by forcing us to cancel the scheduled sale of Go To Eat coupons and restricting the number of admission tickets for popular live events. Notwithstanding this situation, the ticket transaction value continued to display a recovery trend as a result of our concentrated efforts to secure an expanded lineup of concerts and sporting events. We are also continuing with our efforts to expand ticket transactions for online live performances, a fledgling market, while striving to further expand sales for our steady e-commerce business by putting our live commerce into full swing. In our product sales business, a total of 55 stores are in operation nationwide as of February 28, 2022. Stores are making efforts to expand earnings through a range of measures including organizing store events and selling goods at concert venues. In the first half of the fiscal year, United Cinemas Co., Ltd., an operator of cinema complexes, had been affected by the states of emergency and quasi-emergency in applicable regions, such as having to reduce seating capacity and adopt shorter operating hours, but in the second half, almost all theaters resumed their usual operating hours from October 2021, although business hours were shortened at cinemas in some regions after a state of quasi-emergency was declared in January 2022. Furthermore, the company has continued with its efforts to increase the number of visitors, such as by rolling out content-based initiatives. As of February 28, 2022, 42 cinema complexes nationwide with 387 screens are operating. As a result, Entertainment-related Business posted gross operating revenue of 62,996 million yen (up 8.8% from previous fiscal year) and segment profit of 2,275 million yen (segment loss was 297 million yen in previous fiscal year). (Financial Services Business) With respect to our Financial Services Business, we worked to expand our network of financial institution partners and improve the Lawson Bank ATM service in our foundational ATM business. As of the end of February 2022, the number of ATMs installed nationwide reached 13,547 (up 89 from previous fiscal year), with each ATM used 48.4 times a day on average. The total number of our financial institution partners reached 378 nationwide (up 249 from the previous fiscal year) with the addition of shinkin banks in April 2021. As of the end of February 2022, the “smartphone ATM (QR code deposit/withdrawal)”*2 service and 6 “Immediate Account Settlement Service,”*3 had five partners and 12 partners (nine financial institutions and three other service operators), respectively. In addition to the conventional needs to withdraw cash, the use of our ATMs has been increasing, driven by the “ATM charge service,” where cash can be charged at an ATM to “au PAY,” “WebMoney Prepaid Card,” or “PayPay” mobile payment apps. Regarding LAWSON Ponta Plus credit cards issued by Lawson Bank, Inc, we are steadily expanding credit card membership by rolling out a range of promotional campaigns and strengthening promotional *2 A service where customers can deposit/withdraw cash or take out/repay a credit card loan at an ATM by using a smartphone app *3 A service that allows customers to top up their mobile payment app from their account with a financial institution by harnessing As a result, Financial Services Business posted gross operating revenue of 33,603 million yen (up 6.4% from previous fiscal year) and segment profit of 2,962 million yen (up 69.0% from previous fiscal year). efforts at stores. instead of a bank card. the ATM network. (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, where business is continuing to expand, the number of LAWSON stores exceeded 4,000 in September 2021, reaching 4,560 as of the end of February, up 1,216 from the end of the previous fiscal year. In addition to opening new stores through our subsidiaries, we are also launching stores by concluding mega franchise agreements with local retailers in different cities, as well as area license agreements—where partner companies serve as headquarters in designated areas and assume overall operation and development—in efforts to accelerate the expansion of business areas and the number of stores. Chongqing Lawson, Inc. and Guangdong Lawson, Inc. agreed to acquire 100% of the shares of Sichuan WOWO Supermarket Chain Management Co., Ltd. in December 2021 and Tianhong Weiwo Convenience Store (Shenzhen) Co., Ltd. in January 2022, respectively. As a result, we are seeing an expansion of our store network in China and an increased recognition of Lawson in the country, which has led to rises in the number of franchised store applicants, franchised store openings, and directly operated stores converting to franchise stores. We will work to offer our signature high-quality original products including rice and dessert items, enhance the value of the Lawson brand in China, and increase earnings. In other regions of the world, although some stores 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, sustaining the daily lives of our customers as their most accessible store. 7 [Distribution of LAWSON Brand Stores Overseas by Region] Number of stores Change Number of stores Country/Region (As of February 28, during fiscal (As of February 28, 2021) year 2022) China Shanghai and surrounding area (Shanghai, Zhejiang, Jiangsu) China Chongqing and surrounding area (Chongqing, Sichuan) China Liaoning (Shenyang, Dalian) China Beijing and surrounding area (Beijing, Tianjin, Hebei) China Hubei (Wuhan, etc.) China Anhui (Hefei, etc.) China Hunan (Changsha) China Hainan (Haikou, etc.) China Subtotal Thailand Indonesia Philippines United States of America Hawaii 1,826 341 327 215 441 106 65 23 3,344 140 68 67 2 523 148 134 128 85 69 52 77 1,216 26 (3) 2 – 2,349 489 461 343 526 175 117 100 4,560 166 65 69 2 Total 3,621 1,241 4,862 As a result, Overseas Business posted gross operating revenue of 80,039 million yen (up 30.5% from previous fiscal year) and segment profit of 2,342 million yen (up 189.4% from 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. Furthermore, on March 1, 2021 the position of Chief Sustainability Officer (CSO) was assumed by the president and CEO and representative director to further strengthen our initiatives. 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). Lawson’s “Six Material Issues” society and the environment 1. Providing safety/security-oriented overwhelmingly high value-added products and services friendly to 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 8 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 CO2 emissions; (2) reducing food waste; and (3) reducing plastic use (for containers, packaging and shopping bags). 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 CO2 emissions Reduce by 100% CO2 emissions per store Reduce by 50% over 2013 (Target revised upward in June 2021) Reducing food waste Reduce by 50% over 2018 Reduce by 100% Reducing plastic use (for containers and packaging) Reduce by 30% over 2017 (50% of materials used for (100% of materials used for Lawson’s original product Lawson’s original product containers and packaging are containers and packaging are eco-friendly) eco-friendly) ― Reducing plastic use Plastic shopping bags (Plastic shopping bags) Reduce by 100% To reduce CO2 emissions, we will start using solar-derived renewable energy in the fiscal year ending February 2023 at approximately 3,600 stores in the Kanto Koshinetsu region and Gifu, Shizuoka, Aichi and Mie prefectures in collaboration with Mitsubishi Corporation. This will lead to an annual CO2 emissions reduction of about 19,000 tons. Moreover, 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 analyze climate-related risks and opportunities and have been disclosing the results on our official website since December 2020. We will identify impact on our business strategies, examine measures to take, and endeavor to proactively disclose information. To reduce food waste, we strive to optimize the number of purchases and offer discounts at stores to sell 9 out all stock by utilizing AI, and reduce unsold leftovers by selling special feature items on a reservation basis. In addition, we also seek to develop more bento box lunches and ready-made dishes with longer shelf lives and expand our frozen foods lineup, while reducing waste by introducing the Machikado Chubo in-store kitchen service at more stores. To reduce plastic use, we have replaced the plastic cups used for iced coffee and café latte offered at “MACHI café” with paper cups. We started using paper containers for our bento box lunches and cooked noodles, and have adopted thinner plastics and environmentally friendly materials. At about 10 NATURAL LAWSON and LAWSON stores, we sell detergents and dried fruit and nuts by weight, and are looking to expand this sales format. In July 2021, we embarked on a pilot experiment at a store in Yokohama City with the aim of promoting the recycling of used plastic bottles in partnerships with Kirin Holdings Company, Limited and Kirin Beverage Company, Limited by using their infrastructure. Furthermore, timed with the enforcement of the Plastic Resource Circulation Act in April 2022, we will start introducing in phases from April 1 shorter plastic spoons and forks with an opening in the handle, which is expected to reduce plastic by approximately 67 tons. SDGs. Additionally, we implemented the following initiatives during the fiscal year under review in relation to In the area of education for children, we continued with our scholarship program for children from single-parent families, selecting 400 students to receive scholarships in fiscal 2021. Furthermore, in the second half of the fiscal year, we offered special in-hospital classes for children at university hospitals in three prefectures. 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 disabilities, etc. In fiscal 2021, 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 our efforts to support medical professionals and care managers, we offered a complimentary s-size MACHI café coffee to each registered member of a website dedicated to medical professionals and a website dedicated to care managers in May/June and August 2021, respectively. In December 2021, we presented a gift of some 900 Christmas cakes to students and other people in need of support amid the pandemic, as well as 282 sets of New Year’s osechi meals to 846 medical professionals and children requiring support. Furthermore, on December 31, 2021 and January 1, 2022, we sold “Hot Milk” at 65 yen including tax, half the regular price, to raise demand for milk, which had been suffering a delayed recovery in demand owing to the pandemic and reduced consumption due to schools closing for the winter holiday when no lunches are served. The initiative was extremely popular. We intend to continue providing support to people who are negatively affected by the spread of COVID-19. 10 (2) Profit and Loss In terms of operating results for the fiscal year, gross operating revenue increased to 698,371 million yen (up 4.9% from previous fiscal year), operating income totaled 47,096 million yen (up 15.2% from previous fiscal year), and ordinary income amounted to 47,571 million yen (up 26.5% from previous fiscal year). Profit attributable to owners of parent was 17,900 million yen (up 106.0% from previous fiscal year). (3) Overview of Financial Position for the Fiscal Year under Review ① Total assets, total liabilities, total net assets analysis Current assets decreased by 23,184 million yen from the end of the previous fiscal year to 667,627 million yen, mainly reflecting a decrease of 14,619 million yen in accounts receivable-other and a decrease of 14,121 million yen in cash and deposits and an increase of 4,815 million yen in current assets-other. Non-current assets decreased by 5,000 million yen from the end of the previous fiscal year to 669,618 million yen, mainly reflecting a decrease of 8,660 million yen in intangible assets and an increase of 2,531 million yen in investments and other assets and an increase of 1,128 million yen in property and store equipment. Consequently, total assets decreased by 28,184 million yen from the end of the previous fiscal year to 1,337,245 million yen. Current liabilities decreased by 63,063 million yen from the end of the previous fiscal year to 704,691 million yen, mainly reflecting a decrease of 94,300 million yen in deposits received and a decrease of 80,000 million yen in current portion of long-term loans payable, an increase of 68,000 million yen in call money and an increase of 39,251 million yen in deposits received in banking business. Non-current liabilities increased by 29,336 million yen from the end of the previous fiscal year to 354,080 million yen, mainly reflecting an increase of 30,000 million yen in long-term loans payable. Consequently, total liabilities decreased by 33,726 million yen from the end of the previous fiscal year to 1,058,771 million yen. Net assets increased by 5,541 million yen from the end of the previous fiscal year to 278,473 million yen, mainly reflecting an increase of 2,800 million yen in retained earnings and an increase of 2,589 million yen in foreign currency translation adjustments. Consequently, shareholders’ equity ratio was 20.4%, up from 19.6% as of the end of the previous fiscal year. ② Cash flows during fiscal 2021 previous fiscal year to 388,444 million yen. Cash and cash equivalents at February 28, 2022 decreased by 12,692 million yen from the end of the Net cash provided by operating activities was 146,644 million yen, a decrease of 81,309 million yen from the previous fiscal year, mainly because of the movement in accounts receivable-other, deposits received and call money for banking business. Net cash used in investing activities was (51,781) million yen, an increase of 21,798 million yen from the previous fiscal year, mainly because of an increase in purchase of property and store equipment and purchase of shares of subsidiaries and associates. Net cash used in financing activities was (109,516) million yen, a decrease of 31,125 million yen from the previous fiscal year, mainly because of proceeds from long-term loans payable. 11 (Reference) Trends in cash flow indicators 2019 fiscal year 2020 fiscal year 2021 fiscal year Shareholders’ equity ratio (%) Shareholders’ equity ratio on market value basis (%) Interest-bearing debt/cash flow ratio (years) Interest coverage ratio (times) 20.0 42.2 2.6 50.6 (Note) Shareholders’ equity ratio: Shareholders’ equity/Total assets 19.6 36.5 1.9 62.3 20.4 35.9 2.7 42.7 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. (4) Future Outlook Outlook for the next fiscal year (2022 fiscal year ending February 28, 2023) 1H of 2022 fiscal year 2022 fiscal year Forecast (Millions of yen) YoY (%) Forecast (Millions of yen) YoY (%) 510,000 27,500 26,000 146.2 103.0 93.4 1,024,000 53,000 48,500 146.6 112.5 102.0 13,500 77.6 22,000 122.9 Gross operating revenue Operating income Ordinary income Profit attributable to owners of parent (Note) Future Outlook is based on figures after applying the “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29, March 31, 2020). 2. Basic Approach to Selection of Accounting Standards The Group currently prepares consolidated financial statements based on Japanese Generally Accepted Accounting Principles (J-GAAP), but to provide internationally comparable financial information for capital market participants, we are preparing to apply voluntarily International Financial Reporting Standards (IFRS). 12 3. Consolidated Financial Statements and Main Notes (1) Consolidated Balance Sheet As of February 28, 2021 and February 28, 2022 Previous fiscal year As of February 28, 2021 (Millions of yen) Current fiscal year As of February 28, 2022 Assets Current assets: Cash and deposits Accounts receivable-due from franchised stores Lease receivables Merchandise Accounts receivable-other Other Allowance for doubtful accounts Total current assets Non-current assets: Property and store equipment: Buildings and structures-net Tools, furniture and fixtures-net Land Leased assets-net Construction in progress Other-net Total property and store equipment Intangible assets: Software Goodwill Trademark right Other Total intangible assets Investments and other assets: Investment securities Long-term loans receivable Guarantee deposits Deferred tax assets Other Allowance for doubtful accounts Total investments and other assets Total non-current assets Total assets 402,584 46,385 16,621 20,657 161,062 43,519 (20) 690,811 191,977 19,044 8,468 131,779 1,818 14,551 367,640 39,088 38,215 8,349 752 86,406 27,624 40,621 103,030 33,484 16,474 (663) 220,571 674,618 1,365,430 388,463 47,202 15,071 22,128 146,443 48,334 (17) 667,627 189,190 22,762 8,507 124,978 4,720 18,609 368,768 34,884 34,459 7,721 680 77,746 21,738 38,044 103,277 34,736 26,066 (759) 223,103 669,618 1,337,245 13 Previous fiscal year As of February 28, 2021 (Millions of yen) Current fiscal year As of February 28, 2022 Liabilities Current liabilities: Accounts payable-trade Short-term loans payable Current portion of long-term loans payable Lease obligations Accounts payable-other Income taxes payable Deposits received Provision for bonuses Call money Deposits received for banking business Other Total current liabilities Non-current liabilities: Long-term loans payable Lease obligations Deferred tax liabilities Provision for retirement benefits to executive officers and audit and supervisory board members Net defined benefit liability Asset retirement obligations Other Total non-current liabilities Total liabilities Net assets Shareholders’ equity: Capital stock Capital surplus Retained earnings Treasury shares Total shareholders’ equity Accumulated other comprehensive income: Valuation difference on available-for-sale securities Revaluation reserve for land Foreign currency translation adjustments Remeasurements of defined benefit plans Total accumulated other comprehensive income Subscription rights to shares Non-controlling interests Total net assets Total liabilities and net assets 127,486 42,320 100,000 44,584 90,798 4,078 246,110 4,818 40,000 52,168 15,388 767,754 130,000 121,491 485 277 16,278 35,694 20,516 324,743 1,092,498 58,506 46,494 158,498 (991) 262,508 1,782 (207) 3,684 (134) 5,123 333 4,965 272,931 1,365,430 125,681 47,072 20,000 45,955 90,412 7,368 151,809 4,854 108,000 91,420 12,117 704,691 160,000 118,445 449 248 17,438 36,622 20,875 354,080 1,058,771 58,506 46,495 161,299 (973) 265,327 1,585 (69) 6,273 (227) 7,563 368 5,213 278,473 1,337,245 14 (2) Consolidated Statement of Income and Consolidated Statement of Comprehensive Income Consolidated Statement of Income For the fiscal years ended February 28, 2021 and February 28, 2022 (Millions of yen) Previous fiscal year From March 1, 2020 to February 28, 2021 Current fiscal year From March 1, 2021 to February 28, 2022 Gross operating revenue Net sales Cost of sales Gross profit Operating revenue: Income from franchised stores Other operating revenue Total operating revenue Operating gross profit Selling, general and administrative expenses Operating income Non-operating income: Interest income Dividend income Gain on investments in investment partnerships Compensation income Employment adjustment subsidy due to novel coronavirus disease Other Total non-operating income Non-operating expenses: Interest expenses Loss on cancellation of leases Expense due to system failure Other Total non-operating expenses Ordinary income Extraordinary income: Gain on sales of investment securities Total extraordinary income Extraordinary losses: Loss on retirement of non-current assets Impairment loss Loss on novel coronavirus disease Other Total extraordinary losses Profit before income taxes Income taxes-current Income taxes-deferred Total income taxes Profit Profit (loss) attributable to non-controlling interests Profit attributable to owners of parent 15 666,001 275,945 188,441 87,503 288,480 101,576 390,056 477,559 436,682 40,876 730 403 109 490 793 2,016 4,544 3,678 2,065 828 1,238 7,810 37,610 6,232 6,232 3,213 16,635 3,607 2,158 25,613 18,230 9,197 378 9,576 8,653 (36) 8,689 698,371 292,237 199,738 92,498 291,802 114,331 406,134 498,633 451,537 47,096 976 369 1,624 483 1,762 1,202 6,420 3,440 1,423 － 1,081 5,944 47,571 1,103 1,103 1,746 16,616 701 1,512 20,576 28,098 11,226 (1,160) 10,065 18,032 131 17,900 Consolidated Statement of Comprehensive Income For the fiscal years ended February 28, 2021 and February 28, 2022 (Millions of yen) Previous fiscal year From March 1, 2020 to February 28, 2021 Current fiscal year From March 1, 2021 to February 28, 2022 Profit Other comprehensive income Valuation difference on available-for-sale securities Revaluation reserve for land Foreign currency translation adjustment Remeasurements of defined benefit plans Total other comprehensive income Comprehensive income Comprehensive income attributable to Owners of parent Non-controlling interests 8,653 285 － 307 799 1,392 10,046 10,117 (71) 18,032 (196) 138 2,730 (92) 2,580 20,613 20,340 272 16 Total changes of items during period Balance at end of current period － 58,506 1,889 46,494 (6,582) 158,498 20 (991) (3) Consolidated Statement of Changes in Equity Previous fiscal year ended February 28, 2021 (From March 1, 2020 to February 28, 2021) Shareholders’ equity (Millions of yen) Capital stock Capital surplus Retained earnings Treasury shares Total shareholders’ equity 58,506 44,605 165,081 (1,011) Balance at beginning of current period Changes of items during period Decrease by merger Change in ownership interest of parent due to transactions with non-controlling shareholders Dividends of surplus Profit attributable to owners of parent Purchase of treasury shares Disposal of treasury shares Reversal of revaluation reserve for land Exercise of subscription rights to shares (Delivery of treasury shares) Net changes of items other than shareholders’ equity Balance at beginning of current period Changes of items during period Decrease by merger Change in ownership interest of parent due to transactions with non-controlling shareholders Dividends of surplus Profit attributable to owners of parent Purchase of treasury shares Disposal of treasury shares Reversal of revaluation reserve for land Exercise of subscription rights to shares (Delivery of treasury shares) Net changes of items other than shareholders’ equity Total changes of items during period Balance at end of current period 285 285 (262) (15,009) 8,689 (1) 0 21 267,181 (262) 1,886 (15,009) 8,689 (1) 0 － 24 (4,672) 262,508 Accumulated other comprehensive income Valuation difference on available-for-sale securities Revaluation reserve for land Foreign currency translation adjustment Remeasurements of defined benefit plans Total accumulated other comprehensive income (Millions of yen) Subscription rights to shares Non-controlling interests Total net assets 1,496 (207) 3,341 (934) 3,695 255 4,214 275,347 (262) 1,886 (15,009) 8,689 (1) 0 － 24 1,428 1,428 5,123 － － 343 343 799 799 78 78 751 751 2,257 (2,415) 1,782 (207) 3,684 (134) 333 4,965 272,931 1,886 0 3 17 Current fiscal year ended February 28, 2022 (From March 1, 2021 to February 28, 2022) Shareholders’ equity (Millions of yen) Capital stock Capital surplus Retained earnings Treasury shares Total shareholders’ equity 58,506 46,494 158,498 (991) 262,508 Total changes of items during period Balance at end of current period － 58,506 46,495 Accumulated other comprehensive income Valuation difference on available-for-sale securities Revaluation reserve for land Foreign currency translation adjustment Remeasurements of defined benefit plans Total accumulated other comprehensive income (Millions of yen) Subscription rights to shares Non-controlling interests Total net assets 1,782 (207) 3,684 (134) 5,123 333 4,965 272,931 Balance at beginning of current period Changes of items during period Increase by merger Change in ownership interest of parent due to transactions with non-controlling shareholders Dividends of surplus Profit attributable to owners of parent Purchase of treasury shares Disposal of treasury shares Reversal of revaluation reserve for land Exercise of subscription rights to shares (Delivery of treasury shares) Net changes of items other than shareholders’ equity Balance at beginning of current period Changes of items during period Increase by merger Change in ownership interest of parent due to transactions with non-controlling shareholders Dividends of surplus Profit attributable to owners of parent Purchase of treasury shares Disposal of treasury shares Reversal of revaluation reserve for land Exercise of subscription rights to shares (Delivery of treasury shares) Net changes of items other than shareholders’ equity Total changes of items during period Balance at end of current period (196) (196) 1,585 49 (15,010) 17,900 (138) 2,800 161,299 (0) 0 17 17 (973) 49 0 (15,010) 17,900 (0) 0 (138) 18 2,818 265,327 49 0 (15,010) 17,900 (0) 0 (138) 18 2,722 5,541 138 138 (69) 2,589 2,589 6,273 (92) (92) (227) 2,439 2,439 7,563 34 34 248 248 368 5,213 278,473 0 0 0 18 (4) Consolidated Statement of Cash Flows For the fiscal years ended February 28, 2021 and February 28, 2022 (Millions of yen) Previous fiscal year From March 1, 2020 to February 28, 2021 Current fiscal year From March 1, 2021 to February 28, 2022 18,230 80,778 16,635 (730) 3,678 (6,232) 3,213 992 (1,923) (1,952) (4,417) 53,013 34 10,000 21,000 51,512 243,829 704 (3,656) (12,922) 227,954 (5,010) 10 (26,293) (8,471) 7,792 (1,733) (3,675) 4,917 (11,832) 16,010 (380) (1,315) (29,983) 28,098 79,942 16,616 (976) 3,440 (1,103) 1,746 (673) 15,068 (3,467) (1,450) (94,328) 1,153 － 68,000 45,072 157,138 982 (3,434) (8,042) 146,644 (12,001) 10,000 (39,038) (7,731) 6,073 (10,783) (5,088) 7,507 (11,122) 11,904 (1,045) (457) (51,781) Net cash provided by (used in) operating activities: Profit before income taxes Depreciation and amortization Impairment loss Interest income Interest expenses Loss (gain) on sales of investment securities Loss on retirement of non-current assets Decrease (increase) in notes and accounts receivable-trade Decrease (increase) in accounts receivable-other Increase (decrease) in notes and accounts payable-trade Increase (decrease) in accounts payable-other Increase (decrease) in deposits received Increase (decrease) in net defined benefit liability Net decrease (increase) in call loans for banking business Net increase (decrease) in call money for banking business Other-net Subtotal Interest income received Interest expenses paid Income taxes paid Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities: Purchase of investment securities Proceeds from redemption of securities Purchase of property and store equipment Purchase of intangible assets Proceeds from sales of investment securities Purchase of shares of subsidiaries and associates Payments of long-term loans receivable Collection of long-term loans receivable Payments for guarantee deposits Proceeds from collection of guarantee deposits Purchase of long-term prepaid expenses Other-net Net cash provided by (used in) investing activities 19 Net cash provided by (used in) financing activities: Net increase (decrease) in short-term loans payable Repayments of long-term loans payable Repayments of lease obligations Proceeds from share issuance to non-controlling shareholders Payments from changes in ownership interests in subsidiaries that do not result in change in scope of consolidation Cash dividends paid Other-net Net cash provided by (used in) financing activities Effect of exchange rate change on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Increase in cash and cash equivalents resulting from merger with unconsolidated subsidiaries Cash and cash equivalents at end of period (Millions of yen) Previous fiscal year From March 1, 2020 to February 28, 2021 Current fiscal year From March 1, 2021 to February 28, 2022 2,470 － (80,000) (50,700) 2,622 (15,009) (25) (140,642) 224 57,553 343,583 － 401,136 4,752 50,000 (100,000) (49,233) － (15,010) (24) (109,516) 1,941 (12,711) 401,136 19 388,444 20 (5) Notes to Consolidated Financial Statements (Going Concern Assumption) Not Applicable. 1. Scope of consolidation (1) Number of consolidated subsidiaries: 20 (Accounting Policies for the Preparation of Consolidated Financial Statements) Lawson urbanworks, Inc. Lawson Store100, Inc. SCI, Inc. SEIJO ISHII CO., LTD. Lawson Entertainment, Inc. Lawson HMV Entertainment United Cinemas Holdings, Inc. United Entertainment Holdings Co., Ltd. United Cinemas Co., Ltd. Lawson Bank, Inc. BestPractice, Inc. Lawson (China) Holdings, Inc. Shanghai Lawson, Inc. Shanghai Le Song Trading Co., Ltd. Shang Hai Gong Hui Trading Co., Ltd. Zhejiang Lawson, Inc. Chongqing Lawson, Inc. Dalian Lawson, Inc. Beijing Lawson, Inc. BEIJING LUOSONG Co., Ltd. Saha Lawson Co., Ltd. (Domestic) (Foreign) (2) Names of nonconsolidated subsidiaries and others (Domestic) LAWSONWILL, Inc. Seikaken, Inc. SEIJO ISHII SYUHAN CO., LTD. TOKYO EUROPE TRADE 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. Guangdong Lawson, Inc. Chengdu 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. (2) 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., 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., Guangdong Lawson, Inc., Chengdu 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 Lawson (China) Holdings, Inc., Shanghai Lawson, Inc., Shanghai L