In the first nine months of fiscal 2011, the earthquake in March gave customers a new appreciation for convenience store chains with a nationwide base as part of their social infrastructure, providing them with easy access to daily essentials. In addition, LAWSON developed new products using customer purchasing data and introduced fresh foods to stores in an attempt to expand the customer base by attracting more housewives and elderly customers. These efforts paid off with a 5.9% year-on-year increase in cumulative sales at existing stores for the first nine months. In addition, sales increased 4.8% in the three months from September through November, surpassing our own forecasts.
The gross profit margin for the three months from September through November stood at 30.2%, 0.3% points down compared to the same period a year earlier. The contribution of cigarettes sales increased as a result of the tobacco tax increase in October 2010, which reduced gross profit margin by 0.9% points year on year. However, the gross profit margin on products excluding cigarettes exceeded our forecast and contributed to improvement of gross profit margin by 0.6% points. This can be attributed to improved business terms due to progress with planned purchase orders resulting from links between the Ponta card and PRiSM*1, as well as continued success in efforts to raise added value through procurement of raw materials.

Major initiatives in the third quarter of fiscal 2011 were as follows:

• The issued number of Ponta cards for our multi-partner loyalty program continued to increase, reaching approximately 37 million at the end of November 2011. Sales to these card holders represented about 38% of LAWSON's store sales.
• The number of fresh food-type LAWSON stores (hybrid-type), which are basically existing LAWSON stores with a stronger assortment of fresh foods and daily delivered foods, amounted to 3,441 at the end of November.
• In October, we updated our private brand "Lawson select," particularly prepared foods, processed foods and daily necessities, and expanded the number of product items as we strived to enhance brand recognition.

As a result, non-consolidated operating profit increased 3.8 billion yen over the previous year to 45.3 billion yen, surpassing our forecast by 500 million yen.

Among LAWSON subsidiaries and affiliates, LAWSON ATM NETWORKS, INC. contributed to earnings with steady earnings from an increase in the number of ATMs installed and the number of transactions. LAWSON HMV ENTERTAINMENT, INC., the result of the merger of LAWSON ENTERMEDIA, INC. and HMV Japan K.K., in September, also reported strong earnings. As a result, consolidated operating profit increased 3.8 billion yen over the previous year to 49.7 billion yen, surpassing our forecast by 300 million yen.

In the fourth quarter, we will continue implementing the management policies for fiscal 2011 aimed at achieving "Happiness and Harmony in Our Community." Leveraging customer relationship management (CRM) through the Ponta card program, we will put even more effort into promoting the Three Challenge Practices*2 and improving the accuracy in placing orders for products*3 by reducing opportunity losses.

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

• ^*1　This involves utilizing the results of purchase data analysis obtained from Ponta cards to provide a product line-up for individual stores that match each store location and customer profile and improving the accuracy in placing orders for products through PRiSM.
• ^*2　The Three Challenge Practices are points that franchise store owners, employees and store crew (part-time and temporary workers) must pay particular attention to in running LAWSON stores. They are (1) ensuring merchandise assortments are matched to individual locations, (2) serving customers courteously, and (3) maintaining clean stores and surrounding areas.
• ^*3　Opportunity losses refer to situations in which the merchandise needed by customers is sold out.

January 10, 2012

Takeshi Niinami
President & Chief Executive Officer

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