- Japan’s second-biggest operator targets 1,000 stores abroad
- President aims to be profitable overseas by year to Feb. 2018
Japan’s second-biggest convenience stores operator Lawson Inc. is looking to buy other chains in the U.S. as it speeds up overseas expansion, with the aim of boosting its number of overseas outlets by about a quarter within a year.
“In the U.S. where the market is mature, mergers and acquisitions are a simple and straightforward way for us to expand, which would also allow us to buy time to boost the number of shops,” Sadanobu Takemasu, who became Lawson president and chief operating officer Wednesday, said in an interview.
Lawson isn’t working on any deals at the moment, although it could take place any time given the opportunity, according to the 46-year-old, who said in the Tokyo interview he’ll also focus on expanding in Southeast Asia. The company, which operates about 12,500 stores in Japan and 793 outside the country, is targeting a 26 percent increase to 1,000 overseas shops by February 2017.
Lawson and other chains such as Seven & i Holdings Co.’s 7-Eleven and FamilyMart Co. are seeking overseas expansion while competing to displace conventional grocery shops and restaurants domestically, amid economic malaise in Japan. Prime Minister Shinzo Abe said Wednesday he’s postponing an increase in sales tax to October 2019 and promised bold economic steps, as the government seeks to avoid depressing private consumption.
Lawson shares fell as much as 1 percent to 8,690 yen in Tokyo trading, while Seven & i lost as much as 2.3 percent and FamilyMart down 0.9 percent as slumping Japanese stocks drove Asian declines amid a three-day rise in the yen. The benchmark Topix Index fell as much as 1.7 percent.
Lawson has a 5.3 percent market share of Japan’s grocery retail sales, second only to 7-Eleven’s 12.2 percent share, according to data from Euromonitor International. The Seven & i-owned chain also leads Japan’s fast food market with 33.8 percent share, followed by Lawson with 12.4 percent.
The company “respects” the Japanese government’s decision to postpone the sales tax increase and will prepare for it accordingly, said Takemasu, adding that any changes in sales tax prospects would have had a temporary impact on Lawson’s business.
“In Japan, I want to focus resources on the existing businesses to strengthen them,” said Takemasu. “So I’m not considering adding new businesses to our Japan portfolio through mergers and acquisitions for now.”
Takemasu was a former aide to the president at trading conglomerate Mitsubishi Corp. before joining Lawson, and he’s expected to help strengthen the ties between the two companies, said Nomura Holdings Inc. analyst Masafumi Shoda. Mitsubishi is Lawson’s top shareholder with a 33-percent stake.
The new president will also need to seek cooperation between its convenience stores and other businesses, including the Seijo Ishii supermarket operator which it bought for 36.4 billion yen ($327 million) in 2014 and the United Cinema chain of movie theaters, also acquired in 2014, said Shoda.
Lawson, which has outlets including in China, Indonesia, and the Philippines, has lagged its competitors in expanding abroad. Seven & i has about 40,000 shops outside Japan, while FamilyMart has about 6,000.
The company’s U.S. aspirations echo that of Seven & i’s new president Ryuichi Isaka, who said in an interview last month he plans to increase the number of 7-Eleven Inc. outlets in the country to boost its market share that stands at about 6 percent.
To read an interview with Lawson’s largest competitor Seven & i, click here.
Lawson in April forecast an operating loss of 2.9 billion yen at its overseas stores for the current fiscal year ending February 2017. Takemasu said he aims to turn the unit profitable in the following fiscal year.
“It will require Lawson a considerable effort to catch up with Seven & I and FamilyMart overseas,” said SMBC Nikko Securities Inc. analyst Yoshiyuki Namiki. “Realistically, it’s tough for Takemasu to achieve something in a couple of years.”