Top Management Message July 4, 2007

LAWSON announced its operating results for the first quarter of fiscal 2007, ending February 29, 2008. A summary of our consolidated results is as follows:

  • Operating profit declined 0.2% year on year to ¥10.6 billion
  • Ordinary profit declined 2.2% to ¥10.6 billion
  • Net profit declined 20.2% to ¥4.0 billion

Please click here for more details of our fiscal 2007 first-quarter results.

In the period under review, we executed our management strategy of strengthening existing stores. We made progress developing products for health-conscious consumers and converting stores to the LAWSON PLUS format, which handles perishable foods, in a bid to expand our customer base, targeting women and seniors. However, as a result of the following three main factors, our consolidated operating profit stayed almost level with the corresponding quarter of the previous fiscal year:

  • (1) Existing store sales declined 0.6% year on year due to continued sluggishness in regional areas resulting from changing population demographics and less robust economic conditions compared to metropolitan areas of Japan, in addition to stiffer competition among conventional convenience stores;
  • (2) A 0.2 point fall to 31.3% in the gross profit margin, mainly reflecting higher sales of lower-margin cigarettes prior to a tobacco tax hike and lackluster sales in the rice dishes category;
  • (3) Upfront investments for driving medium- and long-term growth, including increased personnel expenses for developing employees and stepped-up recruitment, and investments focused on subsidiaries developing new store formats.

In the second quarter and thereafter, we will continue to implement the key strategies listed below with the main aim of strengthening existing stores. Through these measures, we intend to achieve our full-year plan.

  • (1) We will train store supervisors and store crew (part-time workers) so as to create merchandise assortments matched to regions. At the same time, we will push ahead with the development of products that will expand the customer base. This will include products for specific regions, perishable foods and daily products, and food for health-conscious customers.
  • (2) While aiming to increase the number of cardholders further from the approximately 4.3 million at May 31, 2007, we will run sales promotions based on our LAWSON PASS credit card and MY LAWSON POINT card.
  • (3) We plan to actively convert existing stores to LAWSON PLUS stores. Our goal is to conduct merchandizing activities matched to regions by selling more perishable foods.
  • (4) We aim to open highly profitable stores by strictly adhering to our store opening standards.

LAWSON continues to put emphasis on ROE. Our focus is on generating high earnings exceeding the cost of capital by strengthening existing stores. This will mean breaking away from the conventional industry approach of opening, and at the same time, closing a large number of stores. We ask for your understanding and support as we strive to improve capital efficiency and create corporate value.

July 4, 2007

Takeshi Niinami
President and CEO

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