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Presentation material the 3rd quarter fiscal year FY05 / 2024 (HTML) (2023.5.16-2024.5.15)

March 21, 2024

The Company's plans, business outlooks and strategies contained in this material are based on the judgment of the Company's management obtained from the information available as of the date of the announcement. It is just a future forecast, due to various risks and uncertainties such as intensifying price competition in the market, fluctuations in economic trends surrounding the business environment, large fluctuations in the market price in the capital market, and various uncertainties other than the above. Please be aware that the actual business results may differ significantly.

Index

◼ Performance summary ◼ Medium-term management plan and initiatives for the current period ◼ Appendix

* The following abbreviations may be used in this document.
Fukutaro = Kusurino Fukutaro TGN = Tsuruha Group Drug & Pharmacy West Japan Lady = Lady Pharmacy
B & D = B & D Eleven = Drug Eleven TGMD = Tsuruha Group Merchandising

Performance summary

Financial results highlights

Sales and profits are at record highs

FY05 / 2024 the 3rd quarter

Sales: 774.1 billion yen
(+5.8 % YoY)

Operating income: 40.2 billion yen
(+6.8 % YoY)

Business overview
  • Year-on YoY recovery trend in existing store sales
  • Gross profit margin improved by 0.2 points due to strong sales of food and cosmetics
  • SG&A expense ratio increased by 0.2 points due to increase in fees paid etc.

the 3rd quarter results FY05 / 2024 (YoY)

(million yen / %)

amount of sales
  • Existing stores (13 months old stores) YoY performance +2.9%
Gross profit
  • Gross profit margin increased 0.2% year-on-year due to contributions from food, cosmetics, and pharmaceuticals
Selling, general and administrative expenses
  • Although personnel expenses and utility expenses were held down, the SG&A expense ratio increased by 0.2% YoY due to an increase in fees paid, etc.

Quarterly trends

Current term(million yen /%)

FY5 /23 (million yen / %)

Previous term(million yen /%)

FY 5/22(million yen / %)

Year-on-YoY change in sales (stores 13 months old)

Existing store sales by company

Results by product group (cumulative for the current period)

Results for the current period (million yen/%)

Pharmaceuticals
  • [Preparation]
    Number of prescriptions: 8,914,000 (113.1% YoY)
    Unit price 10,492 yen (98.9%)
    Gross profit margin declines due to drug price revisions and medical fee revisions
    [OTC]
    Sales of cold medicines, etc. were strong, but growth slowed due to a drop in sales of test kits from the previous year.
Cosmetics
  • Recovery trend due to mask removal
Daily goods
  • Sales of clothing and kitchen detergents, hair care, pet food, etc. are strong.
Food
  • Capturing demand with affordability amid rising prices
others
  • Decrease in demand for masks

Sales trends by product group (3Q cumulative)

Sales trends (million yen)

Trends with 3Q of May 2019 as 100%

Number of dispensing stores/PB product results

Status of number of dispensing stores (results)

PB product results (POS results)

< the 3rd quarter overview>
  • Total PB gross profit margin 41.8% (-1.3 points compared to the same period last year)
  • Kurashi Rhythm gross profit margin 47.4% (-1.6 points compared to the same period last year)
  • Due to the decrease in the number of SKUs and the decline in mask sales
    Sales composition ratio rose to 10.0% due to increased sales of existing products

SG&A expenses (compared to the previous year)

(million yen / %)

Labor costs
  • Sales ratio remains unchanged from last year due to personnel cost control
land rent
  • Sales ratio decreased by 0.1% YoY due to switching to in-house construction
Water and utility costs
  • The sales ratio remained unchanged from the previous year due to a lull in the rise in electricity costs.
Depreciation
  • Sales ratio increased by 0.1% YoY due to switching to in-house construction
other expenses
  • Sales ratio increased by 0.2% YoY due to an increase in fees paid etc.

Store opening/closing status

By company

  • ​20 stores closed due to scrap and build
  • Renovation of existing stores 151 stores

By region

*From the beginning of the current fiscal year Number of stores such as EC stores and FC stores Due to a review of the counting standards, The number of stores at the beginning of the period is the same as the number of stores at the end of the previous period. There are some differences.

Balance sheet status

(One million yen)

Cash and deposits
  • Additional acquisition of Eleven shares △11.7 billion yen
Product
  • +6.7 billion yen due to store openings and other factors.
    +6.5 billion yen in the same period last year
Tangible fixed assets
  • Increase due to expansion of store openings and in-house acquisition of store properties
Investments and other assets
  • Investment securities market value +3.9 billion yen
Other debts
  • Increase in accounts payable +5.9 billion yen
net worth
  • Additional acquisition of Eleven shares △11.7 billion yen
  • Valuation difference on other securities +2.6 billion yen

Medium-Term Management Plan and Initiatives for the Current Fiscal Year

Key Strategies and Initiatives for the Fiscal Year

store strategy
store strategy
  • Fiscal year ending May 2025 2,750 stores for the entire group
  • Further strengthen dominance in areas where stores have already been opened (40 prefectures) and open stores with dispensing pharmacy
  • Control the speed of store openings, improve the accuracy of store openings, and improve the profitability of existing stores
External environment
  • Construction costs are on the rise as material prices remain high and wages rise.
  • Trade area population continues to decline amid competition to open new stores and declining birthrate and aging population
  • As prices continue to rise, drugstores are demonstrating their price advantage mainly in food products
attempt
  • Store openings and closings are progressing almost as planned, and the number of stores is expected to exceed the planned number of 2,651 with 2,655 stores at the end of the fiscal year, including those made into subsidiaries.
  • The rate of profitability improved by continuing to review store opening standards, plans, and sales promotions based on dominant store openings.
  • Maintaining a young store age of 6 years and 10 months through continuous renovations
Dispensing strategy
Dispensing strategy
  • Dispensing sales to 140 billion yen in the fiscal year ending May 2025
  • Plan to increase the number of stores to 1,170 by strengthening store openings, mainly with attached stores
  • Respond to the anticipated revisions by increasing the number of items to meet demand and adding various premiums by improving pharmacy functions.
External environment
  • Amid rising national medical expenses, profitability continues to be difficult due to medical fee revisions
  • Deregulation of online services, etc. continues
  • Supply of some medical drugs becomes unstable
attempt
  • The opening of the station is almost as planned and the full-year planned number is expected to be achieved. Dispensing sales ratio steadily rising to 12%
  • Promoting improved convenience by supporting prescription transmission/reservation and online medication guidance
    Started offering self-prescription machines and medicine pick-up lockers that support electronic prescriptions.
  • Work to improve operations and productivity in the dispensing department
PB strategy
PB strategy
  • May 2025 PB product sales composition ratio: 12%
  • Enhanced series lineup
  • Promotion of joint product development with major manufacturers
External environment
  • Rising raw material prices
  • Polarization of consumption continues due to rising prices
  • Corona-related special demand declines
attempt
  • PB sales composition ratio is 10.0%, with full-year plan of 10.3% in sight
  • Promoting the discontinuation of some SKUs while considering profitability
  • Strengthening product development, especially focusing on food products; SKU number increased by 47
DX strategy
DX strategy
  • Build a next-generation infrastructure by renovating the internal systems of each department
    Strengthen customer engagement by deepening digital marketing
    Rapidly catch up with lifestyle and social changes such as e-commerce and online dispensing
External environment
  • DX is beginning to bring about changes in the business environment after the coronavirus pandemic
  • Increase in cashless payment ratio
  • Amid the trend of wage increases, the importance of labor saving and operational efficiency is increasing.
attempt
  • Digital membership ratio: 43%, cumulative number of app downloads: 8.97 million
  • Streamline marketing activities by utilizing MA tools
  • Work to improve operational efficiency by renovating core systems and increasing system investment
  • Introducing our own smartphone payment service (HAPPAY), and increasing usage rate by strengthening sales promotion is a challenge
financial strategy
financial strategy
  • Aim to improve profitability and capital efficiency while continuing to invest in growth
    Operating profit margin 5% ROE 10% for the fiscal year ending May 2025
    Aiming for operating profit margin of 6% and ROE of 12% for the fiscal year ending May 2029
  • Shareholder returns will be implemented with a dividend payout ratio of 50% to 70% for the fiscal year FY05 / 2023 to May 2025.
External environment
  • The economy is on a gradual recovery trend
  • TSE calls for “responses to realize management that is conscious of capital costs and stock prices”
  • As the competitive environment becomes more intense, it is essential to build a stable financial base
attempt
  • Operating profit margin for 3Q is 5.2%, expected to exceed the plan of 4.6% for the full year, and dividend payout ratio will be maintained at 50%
  • ROE continues to exceed cost of capital
  • Strengthening dialogue with the market through IR/SR, expanding disclosure content, enhancing English disclosure, and disclosing integrated reports

Full-year plan FY05 / 2024

Full year (million yen /%)

Existing store sales assumption
  • Stores after 13 months Full year +3.1 (1st half +2.9/2nd half +3.4)

Store opening plan

Full-year store opening plan by company

Full-year regional store opening plan

*From the beginning of the current fiscal year Number of stores such as EC stores and FC stores Due to a review of the counting standards, The number of stores at the beginning of the period is the same as the number of stores at the end of the previous period. There are some differences.

Appendix

Achievements by company

Actual results for the current period

Year-on-year growth rate, capital investment, sales floor area by company

Existing store monthly sales, number of customers, and average customer spend compared to the previous year (consolidated, %)

Capital investment/depreciation expenses

Sales floor area by company (㎡) *Increase/decrease includes those due to renovations.
*Does not include FC stores

Business conditions by region

Sales by region

Comparable store sales by region/operating profit margin by region

Number of stores and sales floor area by region

Number of stores by company/region

Sales floor area by region (m2) *Increase/decrease includes those due to renovations.
*Does not include FC stores

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