Kakiyasu Honten Co.,Ltd.

Market prices for livestock products and agricultural produce may fluctuate significantly due to import suspensions of chicken and beef (caused by food hygiene issues, etc.), natural disasters such as typhoons, and surges in logistics costs stemming from global conditions. This directly affects raw material procurement prices and production costs in each business segment, posing a risk of deteriorating the Group's business performance. The Annual Securities Report does not describe specific countermeasures, indicating a structural vulnerability to price fluctuation risk.

If livestock diseases such as BSE (bovine spongiform encephalopathy), CSF (classical swine fever), or avian influenza occur, in addition to the impact on stable procurement due to import restrictions, revenue may deteriorate due to consumers refraining from purchases. In addition, if foreign object contamination, food poisoning, or misrepresentation of origin occurs, recall costs, litigation costs, and food defense enhancement costs may arise, potentially having a significant impact on business performance and financial condition. As a countermeasure, the Group has established a Quality Control Department and is working to strengthen its hygiene management system.

Natural disasters such as earthquakes and typhoons, fires, power outages, and the spread of various infectious diseases could cause severe damage to production, logistics, sales, and information management facilities and other sites. In particular, since domestic production sites are concentrated in Kuwana City, Mie Prefecture, there is a high risk that a large-scale disaster could halt production activities and delay product supply, affecting business performance and financial condition. The Group implements preventive measures such as regular equipment inspections and employee hygiene management, but it is explicitly stated that there is no guarantee that the impact can be completely prevented or mitigated.

The Group manages and operates its stores and factories, equipment, additive handling, and manufacturing and sales processes based on the Food Sanitation Act. Food hygiene issues are an unavoidable challenge for food-handling companies, and if problems arise due to future changes in the social environment, this could lead to a decline in social credibility and adversely affect business performance. The Group's policy is to continue strengthening its food hygiene management system, focusing on manufacturing and processing equipment.

The Group opens new stores after comprehensively considering investment profitability, including surveys of trade area population, rent, and competitor store conditions; however, there is a risk that stores may become unprofitable due to economic trends or changes in consumer preferences. If store closures, business format changes, or difficulties in securing store locations occur due to unprofitability, this could affect business performance. As the Group maintains an aggressive store expansion policy, this risk may become more apparent as store openings accelerate.

Under the aggressive store expansion policy, securing and developing personnel with store operation experience in particular has become an important challenge. While the Group is working to improve recruitment and hiring levels, enhance post-hiring follow-up, and strengthen OJT and training programs, if personnel acquisition and development cannot keep pace with the speed of store openings, this could affect business performance. Against a backdrop of intensifying competition in the labor market, chronic labor shortages pose a risk of constraining business expansion.

The Group collects and manages personal information such as customer survey data, and if such personal information is leaked for any reason, this could lead to damage compensation claims and a decline in social credibility, affecting business performance. While the Group states that it takes utmost care in managing personal information, specific details of security measures are not described in the Annual Securities Report. With the advancement of digitalization, the risk of information leakage due to cyberattacks and similar threats remains an ongoing challenge.

The Group holds assets including fixed assets related to stores, and if profitability declines at stores and other locations with no prospect of recovery, it may become necessary to recognize impairment losses. The recognition of impairment losses could directly affect business performance and financial condition, with the risk of expanded financial impact in phases where the number of unprofitable stores increases. As a risk inseparable from the aggressive store opening strategy, management of asset efficiency is important.