While we recorded higher earnings in the first quarter, our operating environment remained difficult. Still, positive signs are emerging in the economy such as improving corporate earnings and robust consumer spending in some sectors. Ensuring we take full advantage of this momentum as we approach the year's busiest sales period will have a large bearing on our results for the current fiscal year.

One of our key themes this fiscal year is to enhance the appeal of our rice dishes. I am pleased to report that a new rice ball product launched in May has won resounding acceptance from both customers and franchise owners, eclipsing sales targets and lifting sales in the rice dish category as a whole. I feel this shows that we are creating value for customers by making our products more appealing in areas such as price and taste, as well as offering a more powerful lineup. Buoyed by this success, we are determined to create more products that have this sort of market impact to boost the sales and earnings of both franchise owners and LAWSON.

Raising customer satisfaction (CS) is similarly positioned as a key theme. As I said at the beginning of the year, we are investing substantial resources in training the LAWSON family (franchise owners, store managers, store crew and LAWSON employees) to raise their awareness of CS and their ability to deliver it. I believe that continuing along this path will create an organization totally focused on CS, ultimately raising franchise owner earnings and building LAWSON brand equity.

Expect to see us continue working in this vein to become "the 'hot' station in the neighborhood."

July 6, 2004

Takeshi Niinami
President and CEO

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