Japan's Lawson plans new Asia entry

TOKYO (Reuters) - Lawson Inc (2651.T), Japan's No.2 convenience store chain, said on Monday it plans to open a store in a third city in China in August as it steps up overseas expansion to tap strong growth in Asia.

Takeshi Niinami, Lawson's president and CEO, told the Reuters Rebuilding Japan Summit in Tokyo that the company is also getting ready to open its first store in a Southeast Asian country.

He declined to give the name of either the Chinese city or the Asian country, citing ongoing negotiations, but the company has said Vietnam, India and Indonesia are markets of interest given their rapid economic growth.

Lawson, which trails industry leader Seven & I (3382.T), now has about 310 stores in two Chinese cities, Shanghai and Chongqing, in addition to about 10,000 in Japan.

Niinami said that while the current priority is on growth in Asia he is confident that Japanese-style convenience stores can have opportunities in developed countries as well.

"We would want to enter Europe and the United States eventually," Niinami said. "We want to be where population is growing. In that sense, I suppose it's the United States and especially the East Coast," he said.

Convenience stores, an idea taken from the United States about 40 years ago, have become an important fixture of dailylife in Japan, offering goods ranging from boxed lunches to toiletries and services including bill payment and ATMs.

He said global major retailers such as Tesco (TSCO.L) and Wal-Mart (WMT.N) are pursuing a small-store format strategy, "and in the small format, I think (Japan's convenience stores) are No. 1 in the world."

Niinami, 52, started his career at Mitsubishi Corp (8058.T), which has a 32 percent stake in Lawson, and became president of the convenience store operator in 2002.

He said further consolidation is inevitable in Japan's convenience store sector, which has over 43,000 stores, and only the top two players would be able to survive.

"I don't know whether we will enter developed countries on our own or through acquisitions, but for that to happen we should see consolidation at home first. There are too many stores in Japan," he said.

He also said the wave of the consolidation is likely to go beyond the sector and his firm is also interested in acquiring pharmacies, which he sees as having strong growth potential amid the country's aging population.

CAUTIOUS ABOUT OUTLOOK

While Niinami said his chain has been seeing solid sales growth since the March 11 earthquake and tsunami, it needs to wait until after the summer to decide if it can raise its full-year profit forecast. Summer is an important season for convenience stores and the weather has a big impact on sales.

"We aren't sure what's going to happen in the summer and how the economy will fare in the second half. Depending on the political situation, the environment could get very tough. So we need to be conservative," he said.

Niinami, whose company actively hires non-Japanese graduates as future management candidates, said Japan should open itself to immigration if the country is to revive from the disaster and get back on a growth track.

He also called for deregulation in areas including agriculture, where heavy regulation has prevented the introduction of modern, large-scale farming.

Japan's power utility sector should also be deregulated to invite competition, he said, adding that power generation and grid operations should be split.

(Reporting by Taiga Uranaka; Editing by Michael Watson)