Consolidated operating profit for the first quarter of fiscal 2008 was up approximately 13% year on year, the result of a top-line performance that eclipsed our forecast. One reason for this performance was an upturn in existing store sales, thanks to improved order accuracy and better operational execution. Another factor was an increase in customers stemming from the introduction in Japan of "taspo," a proof-of-age ID card that is now required to buy cigarettes from vending machines throughout Japan; this increased patronage, resulting from the fact that people who have yet to obtain a taspo card must buy their cigarettes at convenience stores and other retailers, led to strong sales of other products.

• (1) Existing store sales increased by 2.7% from the corresponding period of the previous fiscal year. This reflected the success of efforts initiated in the second half of fiscal 2007 to strengthen our product lineup targeted at core customers and enhanced order accuracy through improved store operations and supervising. These efforts drove a recovery in sales of mainstay rice dishes, including boxed lunches, with existing store sales of rice dishes in May higher year on year. The cumulative number of loyalty-point card members, meanwhile, rose steadily, topping 6.9 million. Sales to these members accounted for roughly 13% of our sales. These cards are proving effective in attracting regular customers.
• (2) LAWSON opened a total of 106 stores during the first quarter of fiscal 2008. Of these, 33 were previously operated by Shinsengumi Honbu, with whom LAWSON formed an alliance in January 2008, but the stores now trade under the LAWSON banner. As in fiscal 2007, LAWSON continues to apply strict proprietary in-house criteria for opening stores. As a result of this selective approach stressing quality, we saw a large 77,000 yen year-on-year improvement in daily sales at new stores, to 514,000 yen.
• (3) During the first quarter, we pushed ahead with ongoing initiatives to expand our customer base. Existing store sales at NATURAL LAWSON and LAWSON STORE100 were up substantially on the previous year. Regarding LAWSON PLUS format stores, we continued to see firmly improved sales after converting stores. With LAWSON STORE100 and LAWSON PLUS stores, in particular, the relative affordability of perishable foods and daily delivered foods sold in small quantities and conveniently sized packages has caught on with customers amid rising customer inclination to eat at home and tighten their belts due to soaring gasoline prices and other factors. The concept of a perishable convenience store format appears to have won stronger support than we expected.
• (4) We spent heavily, largely as planned, in promoting sales, running advertisements in the mass media, campaigns and other activities.
• (5) Looking at the performance of subsidiaries, LAWSON TICKET INC. posted strong ticket sales, while LAWSON ATM Networks, Inc. increased the number of ATMs by 800 year on year and also recorded strong ATM transaction volumes. Meanwhile, VALUE LAWSON, INC. saw a sharp year-on-year increase in existing store sales. As a result, all three subsidiaries posted improved earnings year on year.

From the second quarter of fiscal 2008 onward, we are earmarking expenses for vigorously supporting franchise owners in a bid to build on the strong momentum in existing store sales and help them to combat a difficult external operating environment in which raw materials expenses are expected to rise and consumer sentiment is cooling. This should increase the motivation of franchise owners. By also developing aggressive sales promotions, we aim to raise existing store earnings through an increase in customer numbers. Our ultimate goal is higher corporate value.

To LAWSON shareholders and other investors, we ask for your continued understanding and support.

July 3, 2008

Takeshi Niinami
President & CEO

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