The backlash of last year's demand driven by the earthquake disaster and the cigarette sales that dwindled more than we anticipated negatively impacted our sales of FY2012. However, our full year sales on the existing stores (non-consolidated) were on par with the previous year with the efforts put in place on improvement on the assortments of perishable food and foodstuff for cooking, and the installation of MACHI café where freshly brewed coffee is served. These efforts were made aiming to more precisely meet customer needs, which have resulted in the expansion of clientele. We have promoted CRM(Customer Relationship Management) based on in-depth understanding of our customers, and our customer base expanded and in particular loyal customers increased. Ponta card is the loyality program which is our differentiation to analyze our customer base. We succeeded in the development of more value added products taking advantage of our direct involvement in the raw material procurement process. Our business reform PRiSM brought about more progress on systematic order placement. Our gross profit margin excluding cigarettes significantly improved, up by 0.5 percentage points from the previous year.

As a result, the operating profit on the consolidated basis was 66.2 billion yen, up by 4.4 billion yen or 7.2% from the previous year. The operating profit improved for the 10th consecutive year and we hit another record sales following last year. The net income on the consolidated basis was 33.1 billion yen, up by 8.2 billion yen from the previous year, which marks the 15.1% increase from the previous year. This was thanks to no extraordinary loss posted related to previous year's earthquake disaster and extraordinary loss on adjustment for changes of accounting standard for asset retirement obligations. ROE was 15.2%, improved from the previous year.

■Medium- to Long-Term Initiatives

Recognizing it is essential to expand revenues of the convenience store business discussed above, we manage with the focus on entertainment and home convenience business* and overseas operations as well as we deem these are mid-term growth areas. We will implement the following measures to ensure sustainable growth.
*Home convenience business: It is a business that provides such convenience as shopping anything at home by simply accessing to internet through a PC, a smart phone, a tablet device, etc.

Development of products such as MACHI café that provide for high gross profit margin
MACHI café where freshly brewed coffee is served is a driving force for the expansion of a customer base and its face-to-face interaction enables differentiation. As of February, 2013, a total of 2,860 outlets have installed this service (1,740 outlets as of the end of February, 2012). In FY2013 we will accelerate our installation efforts of MACHI café. In addition, we will develop products carrying higher gross profit margin such as over-the-counter fast food and daily delivered food and promote their sales.

Promotion of convenience store business offering perishable food
The number of fresh food-type LAWSON, which has the perishable food and daily delivered food added to the regular LAWSON product portfolio increased steadily to 5,287 as of the end of February, 2013. In FY2013 we will expand the number of fresh food-type LAWSON, and furthermore we will also strengthen our regular LAWSON business in parallel by adding perishable food. Our efforts will continue to increase sales by capturing additional sales from the perishable food.

Promotion of CRM by leveraging the Ponta card data
As of the end of February, 2013, Ponta card issuance exceeded 50 million and the card holder purchase accounts for approximately 45% of the total. We will develop products based on the analysis results of the purchase data of card holders and incorporate them into this effort to more precisely tailor it to preference, age, sex of customers of a given local community. We will enhance the utilization of Ponta card data at an individual store level so that we will be able to supply what customers need and thereby to have them visit a store more frequently.

Operational efficiency and revenue improvement through the reform of supply chain structure
The accumulated knowledge of the data analysis of Ponta cards is driving Lawson's unique structural reform on its supply chain. SCI is an SCM functional subsidiary established in July, 2012 to minimize waste and redundant work throughout the entire process, ranging from the procurement of raw materials, to manufacturing, delivery and sales at stores. It also aims to establish a manufacturing and retail model, covering from raw materials to stores. Optimizing the value chain will enhance competitive edges of our products and enable us to provide sales promotion support to the owners of the stores. Making the most of our know-how, we will ultimately aim to expand this business model to the deals with the external companies.

Roll-out home convenience business in a full fledged manner
Regarding entertainment and home convenience businesses, we started regular home delivery services of food, “Smart Kitchen” in January, 2013 as business of a joint venture company between Yahoo Japan Corporation. Building upon customers' trust and safety that we have successfully earned over an extended period of time for our brick-and-mortar LAWSON, the Smart Kitchen offers a variety of products that are sold at large size supermarkets and the set of foodstuff for simply cooking, geared toward busy housewives. We will solidify the foundation of the home convenience business, leveraging the partnership with Daichi wo Mamoru Kai and Radish Boya aiming to promote it in a full fledged manner.

Overseas operations
In China in FY 2013, we will place the highest priority to improve the quality of products and reinforce the management of the existing stores rather than open more stores in Shanghai where 300 stores are already in operation. In Chongqing and Dalian, which have high growth potential, we will make efforts to improve our brand recognition. In areas other than China, we have selected Thailand to roll out Japanese style convenience stores in FY2013, following Indonesia and Hawaii.

■Profit and dividend plan in FY 2013

Our profit forecast for FY 2013 is to achieve 70 billion yen operating profit on the consolidated basis (105.7% year on year), which will mark the 11th year consecutive profit improvement.
As for the dividend, wishing our shareholders will continuously support us in a mid-to-long term, we plan to raise our full-year dividend by ten yen for the ongoing fiscal year to February 28, 2014 to 210 yen per share.

We thank you, our shareholders and investors, for your continuing understanding and support.

April 10, 2013

Takeshi Niinami
President & Chief Executive Officer

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