News

Financial services help c-store chains increase profits in Japan

July 12, 2004

Japan's two largest convenience store chains, Seven-Eleven Japan Co. and Lawson Inc., reported profit gains for the three months ended May 31 aided by the expansion of financial services including more cash dispensers in outlets.

Seven-Eleven Japan, a subsidiary of Ito-Yokado Co., said net income for the quarter rose 3.4 percent from a year earlier to 24.2 billion yen (U.S. $221 million). Smaller rival Lawson said profit rose 5.4 percent to 4.98 billion yen.

According to Bloomberg.com, Japanese retailers are adding consumer finance services including credit cards and brokerages, and installing cash dispensers in many stores. The financial products help generate profit while retailers wait for the benefits of the country's export- and investment-led growth to bolster income and spending by consumers.

"Investors are worried by poor sales growth," said Edwin Merner, who oversees $600 million in assets as president of Atlantis Investment Research Corp. in Tokyo. "For some companies, same-store sales are actually down in some months."

Household spending in May fell a seasonally adjusted 0.6 percent from April, the government said in a release today. It rose 4.8 percent compared with the year-earlier month. Seven-Eleven same-store sales fell 0.4 percent from a year earlier in June, said Tetsuhiro Kaneko, a company spokesman.

Sales

First-quarter sales rose 6.9 percent to 122.7 billion yen for Seven-Eleven, with Lawson reporting a 2.4 percent gain in sales to 60.6 billion yen. Ito-Yokado, which owns 50.6 percent of Seven-Eleven Japan and is the nation's second-biggest retailer, said sales fell 0.4 percent for the quarter to 867.8 billion yen.

Seven-Eleven and Lawson left unchanged their full-year forecasts for gains in both profit and sales. So did Ito-Yokado even though its first-quarter net income rose 49 percent to 15.4 billion yen. The retailer's banking and credit card business contributed half the profit gain, said Kayoko Miyazato, an investor relations official for the company.

ATM Convenience

Seven Eleven installed automated teller machines run by Ito-Yokado's IY Bank Co. unit at more than 80 percent of its 10,355 stores in Japan as of May 31, the company said.

Gains from its consumer finance unit also contributed to Lawson's first-quarter profit increase. Lawson ATM Networks Inc., a subsidiary that operates ATMs in Lawson stores, had a 5.5 percent rise in net income to 5 billion yen for the period. About 3,218 Lawson stores provided the banking service as of July 2, according to the unit's Web site.

Seven-Eleven had 10,411 outlets as of May 31 including three it opened in Beijing in April. It opened 149 stores and closed 97 during the quarter. Lawson had 7,806 stores nationwide as of May 31, 15 fewer than three months earlier as it shuttered some outlets in Osaka.

Outlook

Shares of Seven-Eleven rose 10 yen, or 0.3 percent, to 3,400 yen on the Tokyo Stock Exchange. Shares of Lawson gained 30 yen, or 0.7 percent, to 4,320 yen. Tokyo-based Ito-Yokado's shares fell 0.2 percent, or 10 yen, to 4,340 yen. The companies released results after equity markets closed in Japan.