Top Management Message for the First Quarter of Fiscal 2013

Today, Lawson announced its financial results for the first quarter of fiscal 2013 ending February 28, 2014. A summary of our consolidated results for the first three months of fiscal 2013 is:

• Operating profit 14.3 billion yen
(up 2.5% year on year)
• Recurring profit 14.4 billion yen
(up 4.8% year on year)
• Net profit 7.1 billion yen
(up 14.8% year on year)

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During the first quarter of fiscal 2013 (March to May), we continued our efforts to realize our Corporate Philosophy, "Creating Happiness and Harmony in Our Communities." We strengthened our offering of perishable foods and food ingredients to be prepared and eaten at home, and introduced freshly-brewed MACHI café at more stores. Through these measures, we strived to expand our customer base and make our merchandise assortments better match the needs of customers in each community. Due to the combination of a decrease in cigarette sales caused by the ongoing trend of a decrease in the number of smokers, bad weather conditions, and a shift of promotional spending emphasis into the second quarter (June to August), net sales of existing-stores decreased by 2.4% year-on-year in the first quarter. Nonetheless, we enhanced development of value-added products with high-quality selective raw materials such as the Japan-branded “Delicious local dishes” series which mainly use domestic ingredients. We also developed and expanded sales of high-margin in-store prepared foods and other products. As a result, they contributed to a 0.5 percentage point improvement in gross profit margin in the first quarter compared to the previous year.

On the profit side, consolidated operating profit increased by 0.35 billion yen or 2.5% year-on-year to 14.3 billion yen. Net profit posted a significant 14.8% increase to 7.1 billion yen, up approximately 0.9 billion yen from the first quarter of the previous year. This was due to lower extraordinary losses, which were mainly attributable to a decrease in impairment loss, reflecting our successful store-opening strategy of emphasizing return on investment (ROI) and focusing on quality rather than increasing the number of stores.

■Key initiatives in the first quarter of fiscal 2013 were:

With the aim of earning support from our newer customer groups, seniors and women, and improving profitability of franchise stores, the number of Lawson
convenience stores which offer freshly-brewed "MACHI café" increased to 3,542 stores by the end of May 2013, up from 2,860 stores at the end of February 2013. Moreover, strong sales of in-store prepared foods such as "Torikara" (Japanese-style fried chicken) and “Yakitori” helped improve gross margin.

The number of Ponta cards issued grew steadily and sales to the card members represented over 45% of Lawson's store sales. In addition to developing
products that respond to individual preferences, age-groups, and gender of customers in each community as we determined by analyzing purchasing data of card members, we began to distribute a monthly analysis report of each store from March 2013, using Ponta card members’ data. We are encouraging each store to use their Ponta card data for optimizing merchandise assortments to better meet the needs of our valuable customers and encourage more visits to the store.

Responding to increasing health-consciousness of the people and the trend
toward aging society, we opened a flagship store that supports healthier life of customers in May 2013. We also sold numerous items with abundant vegetables in the box lunch, pasta, salad, and other categories. We intend to contribute to society by offering healthy food at Lawson convenience stores, which in many cases have become a familiar and integral part of our customers’ lives.

In the second quarter, starting June 1st, we will strive to continue implementing key initiatives taken in the first quarter. Despite the difficult external environment, we continue to aim at our target of achieving our profit target for the first six months of fiscal 2013. We will also enhance our overseas operations as well as entertainment/home convenience business to build a foundation for sustainable medium- to long-term growth.

I would like to express my gratitude to our shareholders and investors, for your continued and unwavering support.

July 5, 2013

Takeshi Niinami
Chief Executive Officer
Representative Director

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