Top Management Message April 13, 2005

Today, LAWSON announced full-year operating results for FY2004, ended February 28, 2005. During the period, prevailing economic conditions in Japan continued to hamper efforts to predict trends in consumer spending. In the convenience store sector, average spending per customer registered steady year-on-year declines at fiscal checkpoints throughout the term and for existing stores sales fell below FY2003 levels.

Against this backdrop, we took advantage of the period—the final year of the LAWSON Challenge 2004 medium-term plan, which was launched in 2002—to focus on two key tasks. The first task was to strengthen the product lineup at Lawson stores—an achievement underscored by the launch of the new Gohantei boxed lunch series. The second was to further emphasize the "Three Challenge Practices," a blueprint for improving customer satisfaction through such efforts as our "mystery shopper" program and the establishment of training centers for franchise owners and front-line staff.

The effectiveness of these efforts, together with an increase in the number of stores in operation and favorable performances by consolidated subsidiaries, contributed to a 15.8% rise in recurring profit, to ¥42.3 billion. This was in line with our initial forecast and a new record for LAWSON. Click here for more details on FY2004 results.

After three years as president, I can say with confidence that we have laid the foundation necessary to realize our vision of making Lawson stores "your neighborhood's 'hot' station." The cornerstones of this foundation are relationship with our franchises and the Head Office.

FY2005 is the first year of a new three-year business plan, dubbed "LAWSON Challenge 2007," the principal goal of which is to make each Lawson store an indispensable part of its local community. Conventional corporate management focuses primarily on the pursuit of profit. While this will of course always be a key driver of corporate decisions, earning the respect of society is gradually taking on increased importance. Accordingly, we will focus on enhancing customer satisfaction while at the same time implementing innovative ideas that will enable us to cultivate value beyond what is possible with conventional convenience stores.

For three years, we have been cleaning house, so to speak. This has involved closing unprofitable stores, rebuilding our vendor network and executing measures to deal with unproductive assets. We recently established the administrative division system, which provides "store-oriented support", and implemented such in-house improvement schemes as the "mystery shopper" program. These efforts have paid off. From FY2005, we will turn our attention to proactive business development. We will invest actively in the seeds of future growth. Specifically, we will step up efforts to help stores tailor their appearances and product selections to suit to the needs of local customers, as well as develop new store formats, revamp our distribution system and provide financial support to franchise owners.

These expenses, incurred now in anticipation of future returns, will expand in FY2005. I am confident, however, that the investment will result in a sharper competitive edge and higher profitability in FY2006 and beyond. We will also endeavor to fulfill our obligation to shareholders by increasing capital efficiency and maintaining a balance between shareholder returns and growth spending, thereby enabling us to raise our annual dividend to ¥90 per share for FY2005, up from ¥70 for FY2004. This translates into a payout ratio of approximately 43%, up from about 36%.

I believe in maintaining long-term, stable relationships with our shareholders, and I look forward to your ongoing understanding as we implement the medium and long-term strategies I have outlined herein. I hope you will continue to expect great things from LAWSON in the year ahead and beyond.

April 13, 2005

Takeshi Niinami
President and CEO

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