Top Management Message

   In the first quarter ended May 31, 2010, the employment picture remained bleak and personal incomes showed little improvement in Japan, despite signs of recovery momentum based on increased exports and production. In the retailing sector, the operating environment remained daunting, with consumers reining in spending and sales blunted by unseasonable weather.

   Against this backdrop, the Company and its franchise stores worked to realize the "FamilyMart Feel" in all business activities such as product development and service provision, by basing store operation on a thorough commitment to service, quality and cleanliness (SQ&C) and wholehearted hospitality - the basics of retailing.

   With structural change sweeping Japanese society - characterized by a declining birthrate coupled with an aging population, and a rise in single-person households - we have put particular focus in improvement of average daily sales per store on older (middle-aged and retired) people, people in their 30s, and children up to the age of 15. A further measure to consolidate our leading status in our sector and bolster management efficiency was the absorption by merger of am/pm Japan Co, Ltd., completed on March 1, 2010. We have embarked on the integration of our businesses, beginning with conversion of am/pm stores to the FamilyMart brand.

   Turning to specific product ranges, in the priority product category Sweets+ (desserts) we launched nationwide sales of Sweets+ ice cream, a line of ice-cream based desserts, and a first-year commemorative product in our Ajiwai Famima Café line of chilled-cup drinks. We have sold over 70 million Ajiwai Famima Café units in one year.

   To ensure a stable supply of products ahead of a planned expansion in the number of our stores in the Tokyo metropolitan area, we have started operations at the FamilyMart Yokohama Tsurumi General Center, the largest production and distribution center for ready-to-eat foods in the FamilyMart chain.

   On May 28, 2010, we underwrote a capital increase by third-party allotment of new shares issued by Entertainment Plus Inc., which provides the online ticketing service "e+." Our aim in underwriting this offer was to raise funds to further strengthen our ticketing services through the joint development of the contents business.

   In store development, we are opening new stores in the three metropolitan areas (Tokyo, Osaka and Nagoya) and leading provincial cities, where growth prospects are strong, and improving the quality of our network through a scrap-and-build policy to deal with changing demand patterns. In converting am/pm stores located along railway lines, we have signed partnership agreements with Tobu Shoji Co., Ltd. (March 30, 2010; comprehensive alliance on convenience-store operation) and Community Keisei Co., Ltd. (April 21, 2010; comprehensive business alliance on convenience-store operation). Following a resolution of our Board of Directors on May 27, we also signed a basic agreement on June 4, 2010 on store-openings in Kyushu with JR Kyushu Retail, Inc., making that company a joint area franchiser.

   These initiatives bring the total number of new store openings for the first quarter ended May 31, 2010 to 83. There were also two store-openings under the TOMONY format and 58 conversions of am/pm stores to the FamilyMart brand. At the same time, we carried out 51 closures, so that the net total of stores in Japan at the end of the quarter stood at 7,250 (non-consolidated basis), rising to 7,778 when stores of three domestic area franchising companies are included (consolidated basis).

   Turning to overseas area franchisers, the total of stores in Taiwan, South Korea, Thailand, China, the United States and Vietnam now stands at 8,337. The combined total of stores in Japan and overseas is now 16,115 (consolidated basis).

   As a result of these developments, total operating revenues in our convenience-store business came to ¥77,808 million, and operating income to ¥8,686 million.

   I would like to thank our shareholders and investors for their continued support.

July 6, 2010
Junji Ueda
President and Chief Executive Officer