STUDIO ALICE Co.,Ltd.

Given the business characteristic of operating photo studios for children, if a visiting child suffers an accident or injury in-store, this could have a significant impact on business operations. The company maintains safety management manuals at all stores and works to prevent accidents through daily confirmation readings at morning meetings.

Since Shichi-Go-San commemorative photography is concentrated in October–November and accounts for approximately one-quarter of annual net sales, if circumstances arise that make photography difficult during this period, it would have a significant impact on operating results. The company is working to level out business activity through initiatives such as "Happy Birthday Shichi-Go-San" and promotion of early Shichi-Go-San photography sessions starting in May, which have shown some effect.

Although Shichi-Go-San is practiced nationwide, centered on the Kanto region, there are regional differences, and the custom could weaken due to changing societal values and attitudes toward children. If this custom declines amid the trend of falling birth rates, it would have a significant impact on operating results. The company is diversifying its revenue sources through expansion of Coming-of-Age ceremony photography (the furisode rental service "Furiho") and promotion of baby photography such as Omiyamairi (shrine visits) and 100-day celebrations.

Japan's birth rate has been on a long-term declining trend, creating a risk of a continuous decrease in the potential customer base for the company, whose core business is children's photography. If the birth rate declines further, it could affect business performance. The securities report does not describe specific countermeasures.

The company has entered into a comprehensive agreement with The Walt Disney Company (Japan) Ltd. covering the use of all Disney characters, which is an important element of differentiation from competitors. If, for any reason, the contract is not renewed and character use becomes unavailable, it could affect operating results through a decline in related sales.

In the course of operating its studios, the company acquires and holds a large amount of customers' personal information. If an information leak occurs due to unforeseen circumstances, it could affect operating results through a loss of customer trust and the burden of costs to resolve related issues. The company is working to establish, strengthen, and continuously improve its security management system.

If an infectious disease such as a novel influenza strain or COVID-19 spreads, it could materially affect operating results through a decrease in the number of store visitors, among other factors. The company is particularly concerned about the risk of the impact of an infectious disease expanding beyond the group's assumptions. It is implementing infection prevention measures with the safety of customers and employees as the top priority.

66% of stores are located within shopping centers, and if the developer experiences business difficulties or the shopping center itself becomes unable to continue operations, the company is expected to lose business locations, affecting operating results. Competition among stores is intense and location conditions are changing significantly, resulting in high uncertainty in the store-opening environment.

Shanghai Toshow Apparel Co., Ltd., a wholly owned Chinese subsidiary of Kyoto Toshow Co., Ltd., is responsible for producing children's costumes for the company. If sharp currency fluctuations or significant changes in China's political, economic, or legal environment occur, production activities could be disrupted or production costs could fluctuate significantly, potentially affecting operating results.

Deterioration in the economic environment or changes in consumption trends could directly affect consumer spending on photography and costume rental services, potentially influencing the group's business performance. The company recognizes changes in the economic environment and consumption trends as one of its general business risks, but the securities report does not describe specific countermeasures.