The major areas of note for the third quarter of fiscal 2007 are summarized below.

Operating profit for the period rose by roughly 7% year on year. While top-line growth struggled, profit benefited from the success of cost control measures targeting selling, general and administrative expenses.

• (1) Existing store sales fell by 0.9% year on year. By region, while sales declined in provincial regions, this was largely offset by healthy performance in urban centers. By product, sales of boxed lunches and other rice dishes were lackluster. In contrast, sales of delicatessen and dessert items were firm, reflecting efforts to enhance product assortments to attract a broader customer base. The cumulative number of loyalty-point card members, meanwhile, rose to more than 5.6 million, accounting for roughly 12% of sales.
• (2) We made progress in refurbishing stores to the LAWSON PLUS model, which handles a wider range of perishable foods and other merchandise, in a bid to expand our customer base.
• (3) Selling, general and administrative expenses were cut in the push for more efficient operations.
• (4) LAWSON opened a cumulative total of 328 stores during the period under review. While we didn't pursuing the number of stores, we opened when and where appropriate based on strict adherence to proprietary in-house criteria. Because this policy will likely result in fewer store openings than projected for the year, we downwardly revised the total number of planned store openings for fiscal 2007 by 50 to 490 stores. In consideration of future profitability, LAWSON intends to refrain from unnecessary store openings.

In light of these results, LAWSON will continue to enact key initiatives in order to meet planned full-year targets for fiscal 2007.

With respect to the alliance with Ninety-nine Plus Inc., LAWSON will become the principal shareholder in Ninety-nine Plus by having a 34.2% equity stake in the company, as announced on December 25, 2007. This move will make it possible to accelerate steps taken since the start of the alliance to rationalize distribution and promote joint product development. Joint product development in particular will spur an increase in the types of merchandise available in moderate or small portion, ultimately enabling LAWSON to offer products line-up matched to customers.

To LAWSON shareholders and other investors, we ask for your understanding and support of our strong commitment to improving capital efficiency, with ROE as a prime indicator, and our continued push to create corporate value.

January 8, 2008

Takeshi Niinami
President & CEO

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