Top Management Messag July 5, 2011

Today, Lawson announced its financial results for the first quarter of fiscal 2011 ending February 29, 2012. A summary of our consolidated results is as follows:

• Operating profit increased 14.9% year on year to 12.8 billion yen.
• Recurring profit increased 16.9% year on year to 12.8 billion yen.
• Net loss of 1.9 billion yen was recorded.

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I am pleased to tell you that our first-quarter operating profit increased by about 1.7 billion yen, or 15%, from a year ago and exceeded our own forecast by 1.2 billion yen. We worked hard to restore damaged areas by the devastating earthquake and tsunami that hit Japan in March, as our top-priority issue, and to realize our corporate philosophy of "Happiness and Harmony in our Community." I believe that our efforts have resulted in renewed appreciation of the value of convenience stores as a source of items needed for daily life that is close to its customers. In addition, we made efforts at offering a merchandise assortment that better satisfies customers' needs, based on our customer purchases data analysis and product development strategies, through emphasizing procurement of high quality raw materials. This has resulted in a 3.2% year-on-year growth in existing store sales in the first quarter of fiscal 2011.

While Lawson recorded a 1.9 billion yen net loss in the first quarter, I can assure you that this was caused by the expected one-off factors of earthquake-related loss (2.8 billion yen) and asset retirement obligation (8.2 billion yen). In fact, the actual net loss was about 1.6 billion less than forecast.

Major initiatives in the first quarter of fiscal 2011

  • We made utmost efforts in supporting restoration of the earthquake-damaged areas and in reopening Lawson stores. As we focused on early recovery of the temporarily-disrupted supply network of merchandise, our earnings in fact recovered much more than expected by May.
  • The number of members of Ponta, a multi-partner shopping points program that Lawson participates in, increased to over 32 million and the ratio of Lawson's sales to its members reached 32% of our total sales. Analysis of customer purchases data and use of our sophisticated IT system (called PRiSM) have contributed to enhance our product development and improve accuracy in order placement. It means that we began to achieve growth based on Customer Relationship Management (CRM.)
  • With an aim to appeal to specific customer groups such as women or senior citizens, we opened some hybrid Lawson stores that emphasize fresh foods and vegetables and refurbished some ordinary Lawson stores to the hybrid format. We also promoted fresh food-type "Lawson Store 100s" by opening directly-operated stores and converting some into franchise-operated stores.

I am confident that we will achieve our full-year earnings forecasts by increasing our efforts at the above initiatives and by improving profitability of franchised stores. We will also promote overseas business as well as the entertainment and e-commerce businesses, to further build a base that enables a sustained mid- and long-term growth for the company.

Let me conclude with the good news that our sales and profit grew favorably in June. Even excluding cigarette sales, we had strong growth over the previous June's sales, reflecting our customers' receptiveness to our selection of food items, and in particular our "Lawson-original" items. I am grateful for this development.

I would like to thank you, our shareholders and investors, for your continuing understanding and support.

July 5, 2011

Takeshi Niinami
President & Chief Executive Officer

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