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Another Quarter of Substantial Increase in Profits Exceeding Our Target

Today, December 29, 2011, we announced our earnings for the first three quarters of the fiscal year ending February 29, 2012.

In the three quarters under review, our existing store sales increased 4.0% year on year on a non-consolidated basis. Total store sales, including Circle K Sunkus' seven consolidated subsidiaries in the convenience store business, rose 6.7% year on year to ¥744,188 million.Consumer demand from efforts to recover from the March 11 earthquake remained buoyant, mainly in the Tohoku region. In addition, tobacco sales continued to increase year on year having passed a full year since prices rose as a result of a tax hike in October 2010. Furthermore, sales remained brisk in mainstay original merchandise; such as ready-made foods and delicatessen items, desserts and countertop fast foods. As a result, consolidated operating income increased 18.6% year on year, to ¥19,841billion, and recurring profit increased a substantial 21.3% year on year, to ¥19,548 billion. Please click here to view our earnings report for further details on operating results for the first three quarters of the fiscal year ending February 29, 2012.

The Third Quarter in Retrospect

During the third quarter of the fiscal year ending February 29, 2012, Circle K Sunkus strengthened sales promotions in support of its franchise stores including the launch of three newly produced TV commercials. As in the previous fiscal year, the Group also continued to hold Franchised Store Forums to provide opportunities for direct dialogue between franchisees and management. In the meantime, Circle K Sunkus pressed forward with sales floor reforms involving layout proposals based on location type. These reforms were implemented to create sales floor layouts that are finely tuned by location, customer base and other market conditions unique to each individual store. In addition, the Company introduced an automated ordering system for general merchandise to the Group in an effort to prevent stock outages and opportunity losses.

On the product development front, Circle K Sunkus enhanced its offering of the UNY Group’s Style ONE private-label items and achieved strong sales in this category. In countertop fast foods, we increased the variety of Yakitori (grilled chicken skewers) stores offer. Plans are to nurture Yakitori into a signature merchandise of Circle K Sunkus. Freshly brewed coffee dispensers were installed on the countertops of 3,200 of the Group’s stores as of November 30, 2011. These we are continuing to install to further differentiate the Group’s merchandise. We also had a major hit in our Cherie Dolce line of original desserts when the recently-launched Torokeru Nama Tiramisu (Meltingly Fresh Tiramisu) went on to sell one million servings in the first 10 days.

Furthermore, in November 2011, Circle K Sunkus announced that it had formed a business alliance with JALUX Inc., a company with rich experience and a strong track record in airport-related business as an airport trading specialist. This alliance will enable the expansion of our convenience store chain to the retail spaces inside airports. The Group now plans to open its first store inside the terminal of Tokyo’s Haneda Airport under a newly developed Sunkus Sky brand name in collaboration with JALUX’s BLUE SKY chain in the March through May quarter of 2012. In these ways, we will continue proactively to form business alliances with various other sub-sectors in retail, with an eye to making further progress in “creating new convenience stores.”

The March 11 catastrophe in 2011 gave people reason to re-evaluate convenience stores for the infrastructure they provide society. It also brought an increase in footfall from middle-aged and elderly customers, as well as homemakers, who had previously not been frequent customers. Consequently, the roles consumers expect Circle K Sunkus to fulfill are continuing to evolve and change. Under the catch phrase of “convenience store friendly to senior citizens,” we plan to address these changes by accelerating the buildup of three new convenience store formats; namely convenience stores emphasizing fast food, convenience stores resembling small supermarkets, and specialized convenience stores. We look forward to the continued support of all our shareholders and other investors.