Equity Analyst, LightStream Research

Oshadhi Kumarasiri

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Bottom-Up

<ul>
<li>The fourth quarter was again a disappointing one for <a href="https://www.smartkarma.com/entities/lawson-inc" target="_blank" data-smartkarma-citation="entities:1040:1" rel="noopener">Lawson Inc (2651 JP)</a> with operating income falling short of consensus by 14.6%.</li>
<li>The next year’s OP guidance of ¥53.0bn (12.5% YoY) is around ¥10.0bn below the pre-COVID level, but Lawson’s lower profitability could be due to heavy upfront investments.</li>
<li>Further out, there is substantial upside to Lawson’s profitability and consensus could be unjustly penalizing Lawson’s growth investments by valuing the company at a discounted FY+2 OP multiple.</li>
</ul>


The fourth quarter was again a disappointing one for Lawson Inc (2651 JP) with operating income falling short of consensus by 14.6%.
The next year’s OP guidance of ¥53.0bn (12.5% YoY) is around ¥10.0bn below the pre-COVID level, but Lawson’s lower profitability could be due to heavy upfront investments.
Further out, there is substantial upside to Lawson’s profitability and consensus could be unjustly penalizing Lawson’s growth investments by valuing the company at a discounted FY+2 OP multiple.


Lawson: Profitability Held Back by Growth Investments

Expert on Japan Retail and Consumer Markets, JapanConsuming

Michael Causton

Expert on Japan Retail and Consumer Markets

Real Insight on Japanese Consumer Markets

JapanConsuming

JapanConsuming is a specialist research firm producing intelligence on Japanese retail and consumer markets. Founded in 2000, JapanConsuming has become the leading provider of insights on Japanese retailers and consumer trends to retailers, brands, government agencies and investors. As well as a highly regarded monthly report on the market, JapanConsuming produces in-depth reports on retail sectors, seminars on key trends and telephone consulting to investors on trends and retailers.

JapanConsuming was founded by Michael Causton and Roy Larke. 

Thematic (Sector/Industry)

<ul>
<li>With energy costs still rising and ongoing supply-chain issues exacerbated by the re-emergence of Covid problems in China, Japanese consumers suddenly face the prospect of genuine price inflation.</li>
<li>How will they respond? Some retailers are trying to resist higher prices at the expense of profits and others have no choice but to raise prices.</li>
<li>We look at the wholesale, retail and consumer response to inflation and which retailers stand to benefit or lose from inflation.</li>
</ul>


With energy costs still rising and ongoing supply-chain issues exacerbated by the re-emergence of Covid problems in China, Japanese consumers suddenly face the prospect of genuine price inflation.
How will they respond? Some retailers are trying to resist higher prices at the expense of profits and others have no choice but to raise prices.
We look at the wholesale, retail and consumer response to inflation and which retailers stand to benefit or lose from inflation.


Widespread Price Rises at Japanese Retail and Wholesale

<ul>
<li>Poplar is one of the few remaining small CVS chains in Japan and is struggling.</li>
<li>It is now trying a new format of mini stores to take merchandise to the customer.</li>
<li>This may not be enough and it will likely cede more of its stores to Lawson.</li>
</ul>


Poplar is one of the few remaining small CVS chains in Japan and is struggling.
It is now trying a new format of mini stores to take merchandise to the customer.
This may not be enough and it will likely cede more of its stores to Lawson.


Poplar Launches Unmanned Stores but Independence Still Under Threat

<ul>
<li>As we have been tracking in recent months, the market for rapid home delivery of FMCG and food is hotting up, with much of the action at convenience stores.</li>
<li>The CVS sector was one of the hardest hit by the pandemic but with a network of 56,000 stores, there is an opportunity to use these stores as supply points.</li>
<li>CVS need to engage with delivery services given the growing number of firms creating their own dark store networks which compete with local supermarkets and CVS.</li>
</ul>


As we have been tracking in recent months, the market for rapid home delivery of FMCG and food is hotting up, with much of the action at convenience stores.
The CVS sector was one of the hardest hit by the pandemic but with a network of 56,000 stores, there is an opportunity to use these stores as supply points.
CVS need to engage with delivery services given the growing number of firms creating their own dark store networks which compete with local supermarkets and CVS.


Quick Commerce and Unmanned Stores Challenge Japanese Convenience Retailing

<ul>
<li>Lawson will begin offering made-on-demand meals direct from its convenience stores. </li>
<li>Suitable stores are being renovated to include in-store kitchens, with 100 planned for this time next year and 1,000 by 2025, with delivery handled by companies like Uber Eats.</li>
<li>Most other chains offering made-to-order meals are small, so Lawson could well take a large share of this growing market.</li>
</ul>


Lawson will begin offering made-on-demand meals direct from its convenience stores. 
Suitable stores are being renovated to include in-store kitchens, with 100 planned for this time next year and 1,000 by 2025, with delivery handled by companies like Uber Eats.
Most other chains offering made-to-order meals are small, so Lawson could well take a large share of this growing market.


Japan

LAWSON, INC. operates a chain of convenience stores in Japan. The Company sells a variety of products including fast food, beverages, snacks, magazines, newspapers, and sundry goods.

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Lawson Inc (2651 JP)

Lawson: Profitability Held Back by Growth Investments

With ¥53.0bn OP guidance for FY23, it seems that the company’s profitability could be ¥10.0-15.0bn above the market expectation. Share price and OP...

Oshadhi Kumarasiri

Widespread Price Rises at Japanese Retail and Wholesale

Japan is finally getting inflation after a decade of government failed efforts. We examine the wholesale, retail and consumer response to evaluate...

Michael Causton

Poplar Launches Unmanned Stores but Independence Still Under Threat

Poplar has been struggling to remain independent and has already ceded 30% of its chain to Lawson. With losses mounting, it is trying new unmanned...

Michael Causton

Quick Commerce and Unmanned Stores Challenge Japanese Convenience Retailing

As we have been tracking in recent months, the market for rapid home delivery of FMCG and food is hotting up, with much of the action at...

Michael Causton

Lawson Expands into Takeaways

Finding ways to increase same-store sales is a problem for Japan's convenience stores given that saturation has resulted in more stores competing...

Michael Causton

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