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Lawson to buy am/pm for 15 billion yen

Earlier today, the Nikkei announced that Lawson is set to acquire rival convenience store operator am/pm for about 15 billion yen. While nothing has yet been formally announced, the Nikkei said it Lawson may announce the buyout by the end of this week. Lawson is apparently set to purchase all existing shares in am/pm from its parent company, Rex Holdings.

Although Japan is saturated with convenience stores, with about 45,000 such shops across the country, am/pm has about 790 of its 1,100 shops in operation within the greater Tokyo area. As the population and ratio of single-member households continue to grow in the Tokyo area, it seems as though Lawson is betting on these locations to continue turning a profit despite Japan’s demographic woes.

Currently, Seven-Eleven operates 12,100 convenience stores in Japan, making it the market leader with nearly 27% of all convenience stores bearing the firm’s logo. Lawson operates about 8,600 shops, and the acquisition of am/pm will narrow the gap between the two industry giants.

It has also been speculated that Lawson has followed Seven-Eleven’s strategy of selling more store-branded items, and that this will help contribute to an earnings increase for fiscal 2008.

The Nikkei article closes with this paragraph:

Convenience store chains logged sales gains in 2008 thanks to new age verification requirements for cigarette vending machines. But the market is maturing, with sales declining for eight years in a row through fiscal 2007. This has made it increasingly difficult for midsize chains like am/pm and the numerous small regional firms to compete against the giants, and the latest deal may spur an industry shakeout.

After those eight years of losses, sales increased due to increased purchasing of tobacco products at convenience stores in 2008, while convenience store sales exceeded department store sales for the first time ever. Still, convenience stores are getting more people into their shops, which is important. However, it should also be noted that in January, the average convenience store customer spent 595.5 yen per purchase, a decline of 0.5% from a year ago.

Back to the Nikkei article. It does seem likely that more moves to acquire smaller players in this sector are to follow, and that smaller firms might find themselves able to sell out at better values as competition to acquire them increases.

A breakdown of convenience store operators by number of shops in Japan:

Seven-Eleven: 12,100 shops - 26.9% of total
Lawson: 8,600 - 19.1%
Family Mart: 7,300 - 16.2%
Circle K Sunkus: - 6,100 - 13.6%
Ministop - 1,900 - 4.2%
am/pm: 1,100 - 2.4%
Others: 7,900 - 17.6%

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