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Takeshi Niinami
President and CEO |
October 16, 2002
I am pleased to announce that yesterday we released our interim operating results for the six months ended
August 31, 2002.
During this period, consumer sentiment remained depressed and signs of a recovery were nonexistent in the
Japanese economy. Failure to reach a final resolution to the bad-loan problem, continuing deflation, falling
exports due to a slowing U.S. economy, and low levels of domestic production and capital expenditures were
among other factors that cast a pall over the economy. With consumption adversely affected, competition
escalated in the Japanese convenience store industry, particularly among major chains. Companies in the
industry are also increasingly battling supermarkets, restaurants and players from other sectors of the
economy.
Against this backdrop, in the first half of the current fiscal year we concentrated on steadily implementing
Lawson Challenge 2004, our reform plan to revitalize Lawson and drive further growth, and ultimately realize
our vision of being "the 'hot' station in the neighborhood." This fiscal year is a litmus test for Lawson
Challenge 2004. We will resolutely dispose of unproductive assets that we have let accumulate over more
than 25 years in business, despite the negative effect this will have on our earnings. Also this year we
are aggressively promoting other initiatives that will give us a leaner framework capable of delivering
growth over the medium and long term and propel us toward our goal under Lawson Challenge 2004 of generating
consolidated operating income of 50 billion. These initiatives include optimizing our manufacturing, distribution
and purchasing networks; revitalizing front-line operations; placing greater emphasis on profitability
when opening stores; introducing a target-based management system; and optimizing our cost structure. I
feel that we took the necessary actions in the interim period to give us this impetus.
Total net sales of Lawson stores including franchised stores were 667,265 million, 0.6% short of target.
One factor was that existing store sales fell 1.0% more than originally planned. However, the gross profit
margin improved by 0.1 of a percentage point against target, notably on account of efforts to keep a lid
on costs. Consolidated recurring profit was 18,667 million, 11.0% higher than originally forecast. This
result is attributable in part to our focus and efforts to persevere under difficult operating conditions.
I am heartened by this performance and now feel that the time is right to take the offensive in the second
half of the year. Granted, if we continue to tightly control costs, I feel we can achieve our original
profit targets. But competition is intensifying and consumer preferences are changing dramatically. Clearly,
now is the time to invest in carefully targeted areas to make Lawson more competitive and build on our
growth potential. It is the time to act quickly to give us an even better chance of achieving our Lawson
Challenge 2004 goals. The additional investments we have decided to make have forced us to revise our original
profit targets downward. But I want to reassure shareholders and other investors that this decision should
result in higher corporate value further down the line.
Further details of our interim operating results and management strategy in the year's second half and
beyond can be found on this website by clicking on http://www.lawson.co.jp/company/e/ir/financial/index.html. |
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Takeshi Niinami
President and CEO |
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