AEON KYUSHU CO.,LTD.

The Company's earnings are heavily dependent on the retail market in the Kyushu region, and factors such as market contraction due to population decline in the region, weakening personal consumption, and intensifying competition across business types and formats could affect business performance. Due to its regionally concentrated business structure, the Company is highly sensitive to deteriorating macroeconomic conditions and changes in the competitive environment. The Company is responding by operating a diverse range of business formats (supermarkets, discount stores, drug & food stores, etc.).

If the Company faces difficulty securing and developing personnel in line with its pace of store expansion, this could slow the pace of new store openings or lower customer service levels, affecting business performance. In particular, in the drugstore business, securing licensed pharmacists and registered sellers of pharmaceuticals is a legal obligation, and a shortage of qualified personnel constrains store expansion. The Company implements diverse training programs from new employees to management level and is actively working to secure human capital.

Fluctuations in foreign exchange rates and market conditions such as crude oil prices pose a risk of significant changes in procurement costs for merchandise, raw materials, and store supplies, as well as store utility costs. This could increase merchandise procurement costs and store operating expenses, potentially worsening profitability. The Company is advancing product development tailored to customer needs, but no explicit disclosure is made in the securities report regarding direct hedging measures against external market fluctuations.

If unforeseen circumstances cause consumer trust in food safety and quality to decline, or if foreign matter contamination or similar incidents occur in the manufacturing processes of business partners or in stores, requiring voluntary suspension of sales at multiple stores, sales could decline, affecting business performance and financial condition. In a retail business format centered on food products, food safety is positioned as a top management priority. The Company prioritizes ensuring product quality and safety, but it is difficult to completely eliminate risks across the entire supply chain.

Intensifying competition, changes in consumer sentiment, legal regulations, and other factors could prevent the Company from executing new store development, renovation/expansion of existing stores, or format changes as originally planned, hindering its growth strategy. In addition, rising real estate prices, chronic labor shortages in the construction industry, and rising construction material costs could push up store opening costs, posing a risk to business performance and financial condition. As the Company pursues multi-format expansion across Kyushu—including supermarkets, discount stores, general merchandise stores, drug & food stores, and home centers—delays in store opening plans directly affect its medium- to long-term growth strategy.

If personal information of customers, business partners, and employees, or confidential management information, is leaked, tampered with, or misused, or if systems are shut down due to a cyber attack, this could result in liability for damages and response costs, as well as a decline in social trust, significantly affecting business, finances, and performance. In response to the recent sharp increase in cyber attacks, the Company has established an information security framework and regulations, set specific operational standards, and conducts regular checks. However, it is difficult to guarantee complete protection against increasingly sophisticated cyber threats.

An economic downturn, financial contraction, credit rating downgrade, or similar factors could prevent the Company from raising the funds necessary for its growth strategy on desired terms and in a timely manner. In addition, in a rising interest rate environment, interest payments on interest-bearing debt could increase, adversely affecting business performance and financial condition. The Company states that it is examining diverse fundraising methods and has established a framework to respond swiftly to changes in the financial environment.

With respect to tangible fixed assets related to stores, impairment losses may be recognized if book value cannot be recovered due to declining profitability, or if there are changes in accounting standards. In the current fiscal year, the Company recorded impairment losses on stores of ¥1,822 million, and additional impairment losses may occur in the future. In a retail business format with a large number of stores, deterioration in individual store profitability represents a significant financial risk.

Tightening of environmental regulations and rising social expectations could result in energy costs and countermeasure expenses exceeding expectations. In addition, if the Company's climate change initiatives and disclosures are deemed insufficient, this could lead to a decline in social trust, affecting business, finances, and performance. The Company operates an environmental management system and is pursuing continuous review and improvement of its environmental performance.

Natural disasters such as major earthquakes and typhoons, fires, terrorism, and the spread of infectious diseases could cause physical damage to stores and facilities and human casualties, disrupting sales activities, distribution, and procurement, and affecting business performance. Regarding infectious diseases, this includes the risk that human, material, and financial disruptions at business partners could cause fluctuations in merchandise supply and procurement prices. The Company has implemented focused fire prevention measures and infectious disease countermeasures (prioritizing the safety of customers and employees while maintaining business continuity), but may find it difficult to respond to events on a scale exceeding expectations.