Top Management Message July 5, 2005

Today, LAWSON announced operating results for the first quarter of fiscal 2005, which ends February 28, 2006. Due to unfavorable weather conditions in eastern Japan in April and May, existing store sales edged down 0.8%. Nonetheless, efforts to enhance quality, service and cleanliness in our stores contributed to strong sales of fast foods, rice dishes and other mainstay products, boosting the gross margin of existing stores up over the previous year's level. As a consequence, first-quarter consolidated recurring profit rose 20.3%, to ¥12.5 billion. (For a full summary of results for the first quarter of fiscal 2005, please click here.)

In line with our pursuit of innovation, we are endeavoring to seek further growth by implementing measures aimed at transcending the conventional convenience store model. Our first priority is to reinforce our more than 8,000 existing stores, thereby enhancing the profits of franchise owners. To this end, we are working to further improve quality, service and cleanliness—with a particular focus on quality, that is, merchandise assortment. Specifically, we are striving to minimize opportunitiy loss resulting from stock out of hot-selling items, an undertaking that we are confident will increase customer satisfaction and enhance profitability. The success of this effort will depend on cooperation between franchise owners and LAWSON's headquarters to ensure an accurate grasp of customer needs and improve ordering precision, thereby preventing stores from running out of top-selling products.

On May 27, 2005, we opened our first "STORE100 " outlet. Our third store format, joining regular LAWSON and NATURAL LAWSON, STORE100 is a brand-new concept that combines the feature of a mini-supermarket and a convenience store. STORE100 outlets feature a wide selection of daily necessities, particularly fresh fruits and vegetables, especially suited to the preferences of, among others, housewives and seniors—two key customer segments that the conventional convenience store format cannot attract.

The occasion of our 30th anniversary in June 2005 presented an opportunity for us to reexamine our common mission. As a result of this, we established a new corporate philosophy— "Happiness and harmony in our Community"—that communicates our commitment to being a useful and valued part of the community. Going forward, this philosophy will underscore all aspects of our business as we work together to fulfill our responsibilities to society and achieve further growth.

July 5, 2005

Takeshi Niinami
President and CEO

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