Top Management Message January 9, 2007

Today, LAWSON announced its operating results for the third quarter of fiscal 2006, the year ending February 28, 2007. In the three-month period from September through November, existing store sales fell 1.4% year on year. This disappointing result reflected a structural problem in our industry, namely the mass opening of stores with essentially the same character by all of the major convenience store (CVS) chains. On a brighter note, however, our overall performance is improving as we benefit from the success of a shopping point campaign targeting bakery products and a Miffy-themed campaign for ready-made meals such as boxed lunches and rice balls, among other initiatives.

In the third quarter, consolidated recurring profit was up 3.1%, the result of ongoing efforts to control selling and administrative expenses.For more detailed information on our third-quarter operating results, please click here.

LAWSON leads the industry in revolutionizing the CVS format so that it matches regional customer needs. In December 2006, for example, we opened HAPPY LAWSON in Nihonbashi, Tokyo. HAPPY LAWSON is a concept store conceived to help parents in raising their children. The opening of this innovative store attracted widespread coverage on TV and in the print media.

The HAPPY LAWSON store was inspired by the top award winning entry in the Future LAWSON 30th anniversary essay competition. The winning essay described a convenience store that gives mothers the support they need to raise their children. This concept store's main target is therefore mothers bringing up children, a customer base not served well by conventional LAWSON stores in the past. Through the various initiatives at the store, we will gain insights into satisfying the needs of mothers with children through our existing LAWSON stores. We will also be able to deliver new value to our existing core customers through these efforts.

Until now, we have had a clear picture of what LAWSON and the CVS industry should be about. Because of this, we have also had a fixed idea of what stores should look like and what will and will not sell. However, will products we don't think will sell, really not sell? Things that didn't sell in the past may sell now. Why? Because customer needs are rapidly changing. In reality, we really don't know what will sell until we put it on the shelves.

LAWSON has long stocked an assortment of products based on perceived customer needs. But moving forward, we must make sure that we thoroughly understand what customers really want. That entails listening to what customers are telling us and extending that to the whole LAWSON chain throughout Japan. I hope to also apply this approach to the insights we gain from the HAPPY LAWSON store. LAWSON PLUS, an experimental hybrid LAWSON store format, was conceived along the same lines. LAWSON PLUS is based on the concept of ensuring existing customers, particularly our core target segment of men in their 20s and 30s, continue to shop with us, while offering something extra (the plus) to expand the customer base. The challenge is how well the needs of customers in the operating area of each store can be identified and then applied to LAWSON PLUS stores.

Competition among CVS chains to open stores, regardless of profitability, is intense. As long as this situation continues, the CVS industry will suffer. However, LAWSON fully intends to change this approach to competition in the CVS sector. NATURAL LAWSON, LAWSON STORE100 and LAWSON PLUS-these formats all represent earnest attempts by LAWSON to expand the customer base. What we are doing is unparalleled in the industry. While leading from the front as we are is fraught with many difficulties, a pioneer acquires knowledge ahead of others. I am convinced that in the near future this knowledge will start bearing fruit for us. We are determined to step up our efforts in pursuit of the winning formula, which we believe we have finally hit upon, to take leadership in the industry.

I want shareholders to understand the nature of LAWSON's new initiatives and our strong will to revolutionize the CVS sector. We ask for your understanding in this regard as we work to realize sustained, consistent growth at LAWSON.

January 9, 2007

Takeshi Niinami
President and CEO

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