Top Management Message October 10, 2007

LAWSON has announced its interim results for fiscal 2007, ending February 29, 2008. A summary of our consolidated results is as follows:

  • Operating profit increased 5.5% year on year to ¥25.5 billion
  • Recurring profit rose 4.8% to ¥25.5 billion
  • Net profit increased 3.3% to ¥12.3 billion

Please click here for more details of our fiscal 2007 interim results.

In the period under review, we executed our management strategy of strengthening existing stores. So we made progress developing products for health-conscious consumers and refurbishing stores as the LAWSON PLUS format, which handles perishable foods, in a bid to expand our customer base, targeting women and seniors.

The major areas of note for the first half of fiscal 2007 are summarized below.

  • (1)Existing store sales fell by 1% year on year and were short of projections, due to continuing fierce competition in regional cities, particularly Chugoku and Shikoku region.
  • (2) Selling, general and administrative expenses were cut according to plan thanks to the more effective use of sales promotion expenses and success in cutting unnecessary management costs.
  • (3)NATURAL LAWSON, Inc. completed the first phase of LAWSON's efforts to establish a distinctive product development approach for health-conscious and other products and raised brand value. It has done this by operating as an independent subsidiary charged with coming up with store designs and products outside conventional convenience store wisdom. But with the first phase now complete and as a second-phase move, LAWSON has decided to transfer the operation of NATURAL LAWSON, Inc. to LAWSON aiming for further growth, accelerate the franchising of stores and further the transfer of product knowledge to existing Regular LAWSON and LAWSON PLUS stores.

In the second half of fiscal 2007, with the ongoing strengthening of existing stores as our main focus, we are aiming to achieve our full-year plan through the strategic measures listed below.

  • (1) We will strengthen existing stores. We will create merchandise assortments matched to regions based on "store charts" (analysis of individual store information). Furthermore, we will run large-scale sales promotions and members-only campaigns using our LAWSON PASS credit card and MY LAWSON POINT card to expand our customer base and increase the number of customers.
  • (2) egarding the LAWSON PLUS format, with a strong focus on ROI and improving franchise owner profits, we are continuing to actively refurbish stores as the LAWSON PLUS and improve merchandise assortments so they better match regional needs.
  • (3) We will open highly profitable stores and focus on quality not quantity of stores by strictly adhering to our unique store opening standards.
  • (4) With respect to the alliance with Ninety-nine Plus Inc., which operates the "SHOP99" chain of "perishable convenience stores", LAWSON STORE100 and SHOP99 are pushing ahead with plans for joint distribution and product development.

LAWSON continues to put strong emphasis on ROE. We are continuing with our efforts to break away from the conventional industry approach of opening—and at the same time, closing—a large number of stores by strengthening existing stores. Also in terms of capital policy, today we decided to repurchase up to \21 billion (or roughly 5% of issued shares) of our own shares. In the future, we aim to increase dividends, and buy back and retire treasury stock but with a firm eye on our stock price. We ask for your understanding and support as we strive to improve capital efficiency, with ROE as a prime indicator, and create corporate value.

October 10, 2007

Takeshi Niinami
President and CEO

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