June 13, 2014

PGOLD to build convenience stores with Lawson

Puregold Price Club Inc (PGOLD) disclosed to the Exchange that it had entered into a joint venture with Lawsons Inc and Lawson Asia Pacific, Inc to build and operate a chain of convenience stores. Puregold will hold 70% of the joint venture with Lawson owning the remainder stake once the master license agreement is executed.

The company plans to have 500 stores by 2020. Lawson is the second largest convenience store operator in Japan where it had 11,716 stores as of 1Q14. It also has operations in the USA, China, Indonesia and Thailand.

Our take. Financial terms of the deal have not yet been disclosed. However, we view this deal positively for PGOLD. Lawson can contribute its technical and logistical expertise to the JV while PGOLD can offer its market dominance as well as its strengths in site location, local market know-how, distribution and bargaining power over suppliers.

We also note that while operating in a competitive space, convenience stores typically sport higher gross margins, which could pull PGOLD's overall margins higher. – WealthSec