Top Management Message April 13, 2016

Today, Lawson announced its financial results for fiscal 2015 ended February 29, 2016.
A summary of our consolidated results for fiscal 2015 is:

• Operating profit 72.5 billion yen
(+2.9% year on year)
• Recurring profit 69.6 billion yen
(-2.9% year on year)
• Net profit 31.3 billion yen
(-4.0% year on year)

Click here for more detailed results.

Despite severe business conditions, Lawson, Inc. was able to generate a steady gross profit margin and firm existing-store sales in fiscal 2015 driven by its unswerving commitment to strengthening the three key areas: our stores, products and franchise system. As a result, Lawson reported a steady gross margin of 31.3% and a 1.4% year-on-year rise in existing-store sales in fiscal 2015. The Lawson Group in Japan opened 1,007 new stores and closed 888 in fiscal 2015, resulting in a net increase of 119 stores at the end of February 2016.

While advertising and promotion costs rose in fiscal 2015, Group subsidiaries SEIJO ISHII CO., LTD. and United Cinemas Co., Ltd., newly consolidated in fiscal 2014, made a considerable contribution to Group performance, resulting in consolidated operating income of 72.5 billion yen (+2.9% or 2.0 billion yen year on year). That marks the thirteenth consecutive year of rising profits to yet another record profit level. At the same time, consolidated net profit contracted by 1.3 billion yen year on year to 31.3 billion yen, due largely to a reduction in deferred income tax assets and an increase in special losses. As a result, return on investment (ROE) contracted to 12.0%.

■Mid-term strategic focus
The convenience store industry is facing unprecedented change. An ageing population and an increase in the number of one or two-person households are changing the fabric of our communities, and the convenience store industry itself is consolidating. The next three years will be crucial to Lawson’s future, and so we have decided to launch a “1000 Days Action Plan” starting from fiscal 2016.

We intend to build a next-generation Lawson-style convenience store by pursuing our business model as a manufacturing retailer based on small commercial areas, enabling us to realize unprecedented store productivity and fulfill our customers’ everyday needs.

I have also laid out a clear Vision, an aspiration which Lawson will strive towards, and renewed our Code of Conduct. Based on our Corporate Philosophy of “Creating Happiness and Harmony in Our Communities”, we are encouraging all members and affiliates of the Lawson Group to join forces in our quest to become a leading execution-driven company, and to become an essential part of our communities.

As part of the company’s plan to strengthen management systems, we decided to create a new management structure effective June 1, 2016 in which I myself will serve as Chief Executive Officer, and Sadanobu Takemasu will serve as Chief Operating Officer. As Chairman and CEO, I will be responsible for implementing the “1000 Days Action Plan” and driving Lawson’s convenience store business forward. Together with Mr. Takemasu, as Company President and COO, we will also strive to create new corporate value for the Lawson Group as its market scope and presence expands.

■Key strategies for fiscal 2016
To encourage customers to visit their local Lawson for their daily needs, Lawson will be looking to offer a full range of products that can support the broad needs of customers’ everyday lives. We intend to actively pursue a number of strategies, including investing in existing-store refurbishment by installing more refrigerator and freezer cases and taller display cases, strengthening the development of health-related products and Lawson Select items, and conducting more aggressive advertising to build awareness of the Lawson’s new merchandising. I want to boost our product range by approximately 10% so we can present a credible supermarket alternative that can readily meet customer needs. I intend to press ahead with our “1000 Days Action Plan” to create a next-generation convenience store model by introducing more semi-automated or planned ordering, launching a distribution center with three different temperature zones, and developing completely new cloud-based IT systems.

■Fiscal 2016 profit and dividend estimates
In fiscal 2016, we aim to achieve our fourteenth consecutive year-on-year growth in consolidated operating profit, with a target of 76.0 billion yen (+4.8% y/y).

In terms of our dividend policy, we intend to uphold the scheduled full-year dividend for fiscal 2015 of 245 yen per share which we announced at the beginning of the fiscal period. Looking forward, Lawson remains committed to its medium-term ROE target of 20%, and places importance on rewarding its shareholders for their loyalty by providing consistent increased returns. Therefore, Lawson intends to increase its fiscal 2016 dividend by 5 yen, to 250 yen per share.

I remain, as always, extremely grateful for the dedicated support of our shareholders and hope you join me in my enthusiasm for a very exciting 1000 days to come, and to realize creating next-generation convenience stores which are essential in our communities.

Thank you.

Genichi Tamatsuka
President and CEO
Representative Director
April 13, 2016

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