Top Management Message October 14, 2008

LAWSON has announced its operating results for the first half of fiscal 2008, the year ending February 28, 2009. A summary of our consolidated results is as follows:

  • Operating profit rose 14.0% year on year to 29.1 billion yen.
  • Recurring profit rose 13.2% to 28.8 billion yen.
  • Net profit climbed 25.9% to 15.5 billion yen.

Please click here for more details of our fiscal 2008 first-half results.

Main Highlights of Fiscal 2008 First-Half Results

Consolidated operating profit for the first half of fiscal 2008 jumped 14% year on year to a record 29.1 billion yen. This all-time high was the result of a larger-than-forecast year-on-year increase in existing store sales. Some of the factors that contributed to these higher sales were improved order accuracy and better operational execution; the introduction in Japan of "taspo," a proof-of-age ID card that is now required to buy cigarettes from vending machines throughout the country; and the resulting increase in patronage due to the fact that people who have yet to obtain a taspo card must buy their cigarettes at convenience stores and other retailers, which led to strong sales of other products.

  • (1) Existing store sales increased sharply by 5.4% from the corresponding period of the previous fiscal year. Besides cigarettes, this reflected in part the success of investments to improve store operations and supervising as well as efforts to enhance merchandise assortments in stores, which drove a recovery in sales of rice dishes and other products.
    The cumulative number of card members for our proprietary loyalty point cards, meanwhile, rose steadily, topping 7.2 million. Steady sales to these members accounted for roughly 13% of all our sales.
  • (2) LAWSON opened a total of 231 stores during the first half of fiscal 2008. Of these, 42 were previously operated by Shinsengumi Honbu, with whom LAWSON formed an alliance in January 2008; these stores now trade under the LAWSON banner. As in fiscal 2007, LAWSON continues to apply strict proprietary in-house criteria for opening stores. As a result of this selective approach stressing quality, we saw a large 95,000 yen year-on-year improvement in daily sales at new stores, to 542,000 yen.
  • (3) Existing sales at LAWSON STORE100 remained strong, substantially up on the previous year. I believe that one of the reasons underlying this strong showing is the high marks given by customers to the perishable foods convenience store format for providing food in small quantities and conveniently sized packages amid deteriorating economic conditions in Japan. We are now trialing the conversion of SHOP99 stores to the LAWSON STORE100 format, as well as increasing the number of product items in the jointly developed private brand Value Line, under our alliance with Ninety-nine Plus Inc. During the interim period, we conducted a tender offer for Ninety-nine Plus and going forward we plan to strengthen our relationship with this company, which is now a member of the LAWSON Group.
  • (4) Subsidiary LAWSON ATM Networks, Inc. increased the number of ATMs installed in stores by 500 compared with the corresponding period of the previous fiscal year. Coupled also with strong growth in ATM transaction volumes, this subsidiary saw earnings increase substantially year on year.

In the second half of fiscal 2008, we are aiming to raise existing store earnings by increasing sales. Our approach will be to strengthen sales promotions in anticipation that the benefits stemming from taspo's introduction will decline as time passes. We will also further improve merchandise assortments based on ongoing improvements in ordering accuracy.

We ask for the continued understanding and support of LAWSON shareholders and other investors.

October 14, 2008

Takeshi Niinami
President & CEO

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