Top Management Message April 24, 2007

LAWSON recently announced its operating results for fiscal 2006, ended February 28, 2007. A summary of our consolidated results is as follows:

  • Operating profit rose 1.5% year on year to ¥44.5 billion
  • Ordinary profit increased 1.6% to ¥44.6 billion
  • Net profit declined 4.7% to ¥20.9 billion
  • ROE was 11.3%
  • Net income per share (EPS) was ¥201.5

The highlight of our fiscal 2006 performance was that consolidated operating profit rose for the fourth straight year. Please click here for more details of our fiscal 2006 results.

At the beginning of fiscal 2005, we launched the "LAWSON Challenge 2007" medium-term management plan. Under this plan, we set targets of a 10% average growth rate in consolidated EPS over the 3 years from fiscal 2005 through fiscal 2007, and ROE of 15% for fiscal 2007. Since fiscal 2005, we have managed the company from a medium-term viewpoint with the aim of raising our corporate value by improving FC owner earnings.

However, over the past two years, we have seen all the major convenience store (CVS) chains open a large number of stores of essentially the same nature that target male customers in their 20s and 30s. This period has also coincided with intensifying competition transcending business models—we now face stiffer competition from supermarkets and takeout shops. To respond to this operating environment and improve FC owner earnings, we saw a need to make upfront investments geared toward expanding our customer base by increasing the number of middle-aged, elderly and female customers. This has entailed the development of new format stores, two of which are NATURAL LAWSON and LAWSON STORE100. We have invested in other areas of our operations too: we now have an improved perishable foods and daily products delivery system to satisfy local customer needs, and we have invested in our workforce to give them the skills to create merchandise assortments matching local preferences. These investments show our awareness of the issues CVS operations face. Importantly, these bold upfront investments will also give us an edge over other companies and we believe help us to sustain growth over the medium and long terms. In the short term, though, we expect earnings growth to be lower than we assumed at the outset of LAWSON Challenge 2007. Based on this revised outlook, we are now forecasting average EPS growth of 2.3% for the 3-year period of the management plan and ROE of 11.1% in fiscal 2007.

Through our efforts to date we have gained considerable know-how on expanding the customer base. We intend to make full use of this knowledge to revitalize existing stores with the view to improving FC owner earnings as well as to improve our capital efficiency by closing fewer stores.

The following three strategies will be key to strengthening existing stores in fiscal 2007.

I want shareholders to understand the nature of LAWSON's new initiatives and our strong will to revolutionize the CVS sector. We ask for your understanding in this regard as we work to realize sustained, consistent growth at LAWSON.:

  • (1) We will train store supervisors and store crew (part-time workers) so as to create merchandise assortments matched to regions. At the same time, we will push ahead with the development of products that will expand the customer base. This will include products for specific regions, perishable foods and daily products, and food for health-conscious customers.
  • (2) While aiming to increase the number of cardholders further from the 3.4 million at February 28, 2007, we will run sales promotions based on our LAWSON PASS credit card and MY LAWSON POINT card.
  • (3) We plan to actively convert existing stores to LAWSON PLUS stores. Our goal is to conduct merchandizing activities matched to regions by selling more perishable foods.

LAWSON believes that achieving a high ROE by improving FC owner earnings will translate into increased corporate value. By extension, we are convinced we will also meet the expectations of our shareholders.

As in the past, LAWSON will continue to place importance on balancing stable growth with actively returning profits to shareholders, aiming to achieve sustained growth over the medium and long terms. In addition, we will consider buying back and retiring more shares and raising the dividend based on our target of achieving a dividend payout ratio of more than 40%.

In fiscal 2007, we intend to pay an annual dividend per common share of ¥110, up ¥10 on fiscal 2006.

We ask for your understanding and support as we strive to improve capital efficiency, including upfront investments, and create corporate value.

April 24, 2007

Takeshi Niinami
President and CEO

Archives(Back Numbers)