Top Management Message April 14, 2011

To begin with, I would like to offer my deepest sympathy to those who have suffered from the Great East Japan Earthquake, and to pray for the early recovery of the affected region. Now more than ever, the LAWSON Group (LAWSON) will revisit its corporate philosophy of "Happiness and Harmony in Our Community." We will make every effort to support rebuilding of the communities affected by the disaster.

Today, LAWSON announced the full-year financial results for fiscal 2010 ended February 28, 2011. Major figures (on a consolidated basis) are as follows:

• Operating profit 55.5 billion yen
(110.5% year on year*)
• Recurring profit 54.5 billion yen
(110.4% year on year)
• Net Profit 25.3 billion yen
(202.1% year on year)

Please click here for more details.

Although sales of some products, such as drinks and ice cream, increased because of the record-breaking hot summer, LAWSON's gross operating revenues declined by 5.5% year on year to 441.2 billion yen due to factors such as the conversion of directly-operated into franchise-operated stores. However, high-margin products such as desserts and pasta became hits, resulting in 0.8% higher sales of the existing stores than the previous year. Combined with the effective use of expenses, operating profit increased by 10.5% to 55.5 billion yen This figure means our historical record and eight straight years of profit increases.

Impact of the Great East Japan Earthquake on LAWSON's Outlook

The Great East Japan Earthquake has widely affected our business operations. LAWSON is considering an extraordinary loss of 5 billion yen which comes from destruction of around 20 stores mainly in the Sanriku coastal area, drained merchandise, malfunction of distribution system and business suspension considering the nuclear plant accident. LAWSON has been working to recover the supply chain and resume business in the suspended stores. As a member of the affected communities, we will continue to work on recovery of the affected stores.

Major Initiatives for Fiscal 2011

In fiscal 2011, we will expand our customer base and shape our position in the entertainment and e-commerce business, and overseas operations by focusing on the following initiatives:

·Employ Group System and Branch System

LAWSON has recently divided its operations into three groups: (1) the CVS Group, (2) the Entertainment & e-Commerce Group, and (3) the Overseas Group. Each group has its own CEO to speed up decision making process. By doing so, we can further leverage our unique multi-format approach. We also appointed 76 branch managers under seven regional offices so that we can offer merchandise assortments that match customers' diverse needs and specifically incorporate community-driven demand.

·Reduce opportunity loss

Opportunity losses, which occur when a product desired by customers is out of stock, constitute one of the most critical issues in LAWSON's store operations. In fiscal 2010 we introduced a sophisiticated IT system called PRiSM which allows us to quantify lost sales opportunities. In fiscal 2011 we are planning to further reduce opportunity losses and improve customer satisfaction.

·Develop our multi-partner shopping points program

We will continue to develop our multi-partner shopping points program, Ponta, to sharpen our marketing analysis and sales promotion strategies. By the end of fiscal 2010, over 30 million people have joined in this program and card holders' shopping frequency is increasing as the number of partner companies is growing. As a result, we can apply customers' purchase data to identify customers' needs and to develop new products in response to different genders, ages, and individual's tastes.

Major Initiatives for Fiscal 2011

Based on the customers' purchase data collected by Ponta cards, LAWSON will expand the customer bases of bricks-and-mortar stores. At the same time, we will also leverage the Internet to provide "whatever you want, whenever and wherever you want." The pillars of this approach will be as follows:

·Expand our customer base

We will develop store formats and merchandise assortments more attractive to women and senior citizens, who haven't used convenience stores much in the past. Through Ninety-nine Plus Inc., one of LAWSON's key subsidiaries, we have strengthened our merchandising for fresh foods ahead of our peers. With the expertise we have accumulated by this initiative, we are planning to expand the fresh-food CVS format, LAWSON STORE 100s, as well as hybrid stores that emphasize fresh foods and vegetables particularly in residential areas. Furthermore, we are trying to offer customers lunch boxes and delicatessens that are freshly prepared by on-site cooking. Since our initial experiment in 2004, we have successfully established a system that allows any store employee to prepare fresh lunch boxes at our stores. We will try to develop this initiative on a full-fledged basis from now. We also plan to train licensed sales personnel to enable us to sell class 2 and class 3 over-the-counter drugs. By developing stores combined with drugstore or dispensing pharmacies, we can create a business model to provide both physical and mental care.

·Entertainment and e-commerce

As we have positioned entertainment and e-commerce as key growth fields, we have been selling entertainment-related products through our in-store Loppi multimedia terminals and our Ponta & LAWSON web shopping site. We have also been providing a ticketing service through our subsidiary, LAWSON ENTERMEDIA, Inc. We intend to utilize the assets of HMV, a major music and video software retailer that became our subsidiary in December 2010, while continuing to using the Internet and our bricks-and-mortar stores to strengthen our services.

·Overseas expansion

Since we first set up a CVS store in Shanghai in 1996, LAWSON has overcome different kinds of obstacles including poor infrastructures and cultural differences, and expanded our operation to 300 stores. In July 2010 we opened several stores in Chongqing city, one of China's directly-controlled municipalities such as Beijing, Shanghai, and Tianjin. We will apply our Shanghai experiences and knowledge of Japanese-style CVS operation to further expansion of store operations in major cities in China and other Asian countries.

Major Initiatives for Fiscal 2011

Although the Great East Japan Earthquake brought significant impact on our operations, we expect to increase our operating profit for the ninth straight year to 57.5 billion yen (103.5% year on year) by further improving our product development and executing the planned actions more precisely. In order to make sure our shareholders to support us over the medium to long term, we plan to raise our full-year dividend by five yen for the ongoing fiscal year to February 29, 2012 to 175 yen per share.

We thank you, our shareholders and investors, for your continuing understanding and support.

April 14, 2011

Takeshi Niinami
President & Chief Executive Officer

Archives(Back Numbers)

PAGE TOP