Lawson Profits Plunge on Unexpected Cost Burdens
No-moat Lawson’s fourth-quarter results came in significantly below our expectation and the company’s guidance by more than 15%, although we had expected the miss. The unexpected JPY 7 billion cost increase related to IT system investment, along with the strategy of a high pace of store openings, has prompted us to cut our earnings forecasts by 10%-20% from 2018 and onward. We have therefore lowered our fair value estimate to JPY 6,100 from JPY 7,500. The new fair value estimate implies 10% down...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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