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Presentation material the 3rd quarter fiscal year FY05 / 2023 (HTML) (2022.5.16-2023.5.15)

March 23, 2023

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

◼ FY05 / 2023 the 3rd quarter results overview ◼ Medium-term management plan and initiatives for the current fiscal year

* 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

Summary of the 3rd quarter Results FY05 / 2023

Financial results highlights

Maintain sales and profit growth

Results for the 3rd quarter FY05 / 2023

Sales 731.4 billion yen
(+5.7 % YoY)

Operating income of 37.7 billion yen
(+10.8 % YoY)

Business overview
  • Year-on YoY recovery trend in existing store sales
  • Gross margin improved by 0.5 percentage points due to increased sales of pharmaceuticals, etc.
  • SG&A ratio increased by 0.2 percentage points due to soaring utility costs, although personnel expenses were curtailed

FY05 / 2023 the 3rd quarter (YoY)

(million yen / %)

amount of sales
  • Existing store (13 months old store)
    YoY +1.6%
  • Contributions from 111 new store openings
Gross profit
  • Gross profit margin increased by 0.5% YoY due to increased sales of pharmaceuticals and improved gross profit margin of miscellaneous goods.
Selling, general and administrative expenses
  • Although we were able to control personnel expenses, the SG&A ratio increased by 0.2% YoY due to an increase in utility costs, etc.

Consolidated business results (quarterly trend)

Current term(million yen /%)

FY5 /23 (million yen / %)

Previous term(million yen /%)

FY 5/22(million yen / %)

SG&A expenses (compared to the previous year)

(million yen / %)

Labor costs
  • Sales ratio decreased by 0.2% from the same period of the previous year due to productivity improvement and labor cost control
other expenses
  • Utilities (electricity charges)
    +3.7 billion yen YoY
  • Depreciation due to store opening
    +1.3 billion yen YoY

Achievements by company

Current 3Q Cumulative Results

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

Store openings/closings/sales/operating income by company

Number of stores

  • ​144 stores renovated from existing stores

Existing Store Sales/Operating Margin

Store openings/closures/sales/operating income by region

Number of stores

Existing Store Sales/Operating Margin

Results by product group (cumulative for the current period)

Current 3Q Cumulative Results (million yen / %)

Pharmaceuticals
  • [Dispensing]
    Increase in number of prescriptions due to increase in number of pharmacies
    GPM decline due to drug price revision and medical fee revision
    [OTC]
    Increased sales of test kits and cold medicines, improved gross profit
Cosmetics
  • The flow of people is recovering, but the increase is only slight
Daily goods
  • Gross profit improved due to expansion of private brand products and special demand for corona-related products
Food
  • Increased sales of alcoholic beverages, daily deliveries, fresh food, etc.
others
  • Gross profit improvement for masks, etc.

Dispensing department results

Current 3Q Cumulative Results (million yen / %)

  • ​72 newly opened dispensing pharmacies

Number of dispensing stores by company

Performance of PB products

Current 3Q Cumulative Results (POS Results) (million yen / %)

Strong sales of daily necessities
Double-digit sales growth
  • ​9.7% of all private brand sales
  • Gross profit margin 43.2%
    (down 0.1 points year-on-year)
Kurashi Rhythm series
Continued sales expansion
  • Increased by 13 SKUs mainly in daily necessities and healthcare
  • Continuing to revise and abolish monopoly products and limited-edition products
  • Gross profit margin 49.0%
    (+1.6 points YoY)

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

Full-year plan FY05 / 2023

Full year (million yen /%)

Key strategies in the new medium-term management plan

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
  • Suppress store opening speed, increase accuracy and open stores
    Improve profitability of existing stores
Dispensing strategy
  • Dispensing sales of approximately 100 billion yen to 140 billion yen in the fiscal year ending May 2025
  • Strengthen store openings centered on store openings, and plan to increase the number of stores from the current 760 to 1,170
  • Respond to the anticipated revisions by increasing the number of items to meet demand and adding various premiums by improving pharmacy functions.
PB strategy
  • 12% of private brand product sales in the fiscal year ending May 2025
  • Enhanced series lineup
  • Promotion of joint product development with major manufacturers (Double Chop*1)
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 pharmacy
financial strategy
  • Improve profitability and capital efficiency while continuing to invest in growth
    5% ROE 10% for the fiscal year ending May 2025,
    Aiming for 6% operating margin and 12% ROE for the fiscal year ending May 2029
  • Shareholder returns will be from the fiscal year FY05 / 2023 year ending May 2025
    Targeting a dividend payout ratio of 50% to 70%​

*1: Store brand products jointly developed with major manufacturers

Key Strategies and Initiatives for the Fiscal Year

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

Store opening plan by region

*Transfer of business on July 1

Store opening plans by company

*Transfer of business on July 1
Dispensing strategy
  • Dispensing sales of approximately 100 billion yen to 140 billion yen in the fiscal year ending May 2025
  • Strengthen store openings centered on store openings, and plan to increase the number of stores from the current 760 to 1,170
  • Respond to the anticipated revisions by increasing the number of items to meet demand and adding various premiums by improving pharmacy functions.
Response to electronic prescriptions
  • Introduction of online qualification confirmation system
    ⇒Introduced in all stores
  • Started operation at some stores in model districts
    (7 stores in Yamagata Prefecture and Hiroshima Prefecture)
Expansion of prescription transmission and reservation services
  • Improving convenience and securing the number of prescriptions
    • Access via own app
    • Over-the-counter prescription reception machine, etc.
      • 　　
PB strategy
  • 12% of private brand product sales in the fiscal year ending May 2025
  • Enhanced series lineup
  • Promotion of joint product development with major manufacturers
Steady sales composition ratio
  • Changes in the environment surrounding the novel coronavirus
    • Good sales of coronavirus-related products such as masks
    • Growing demand for cold medicines and other products due to an increase in the number of people receiving medical treatment at home
  • Expand sales per product
    • Sales of existing products are strong against the backdrop of continued price hikes for national brand products