Lawson's Better-Than-Expected Profits Boosted by Delay in Investment; No Fundamental Improvement
No-moat Lawson's second-quarter profits came in 12%-13% above our expectations and its interim guidance, thanks to cost-cutting and a delay in marketing investment. However, management's effort to lift per-store sales through increased evening/nighttime traffic has yet to bear fruit. Lawson has accordingly reduced its sales guidance by JPY 10 billion or 1.3% but kept its profit targets unchanged. We maintain our forecasts and fair value estimate of JPY 6,100. We reiterate our view that expanding...Lawson and its subsidiaries are mainly engaged in the operation of convenience store chains in Japan and overseas. As of Feb 28 2017, Co. maintains 12,575 stores in Japan and 1,156 stores in China, Thailand, Indonesia, the Philippines and the U.S. Co. is also engaged in the operation of a chain of small supermarkets that seeks to develop and manufacture high-value-added products, the sale of tickets for concerts, sports events, movies and others; the import and sale of compact discs and digital versatile discs; the provision of home delivery services of foods and daily goods through the Internet; the operation of multiplex theaters; and the financial and consulting businesses.
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