AUTOWAVE CO.,LTD.

The ratio of interest-bearing debt to total assets stood at 17.5% as of the end of March 2026, and future increases in interest rates may raise funding costs. In addition, the syndicated loan agreement includes financial covenants, and if indicators such as net assets or ordinary income fall below prescribed thresholds, the company could lose the benefit of the grace period and be required to face collateral enforcement or lump-sum repayment. This structure means that both interest rate trends and deteriorating business performance can affect the company's financial position.

Studless tires and tire chains are seasonal products whose demand is heavily dependent on the presence or absence of snowfall, creating a risk that sales will decline significantly in years with mild winters or low snowfall. Because weather is an external factor beyond the company's control, it constitutes a persistent source of earnings volatility. High dependence on specific products may also make the company susceptible to long-term climate trends.

As the company's business model is centered on in-store sales, physical damage to stores or infrastructure caused by earthquakes, typhoons, or other natural disasters may force the suspension of business operations. Although the company has established internal emergency response systems and provides accident-prevention training, a wide-area disaster could simultaneously affect multiple stores. Lost sales during periods of business suspension would directly impact financial performance.

As a retailer, the company stores and manages customers' personal information, and any information leakage resulting from unauthorized access or other causes could lead to a decline in customer trust and damage to the brand. While the company states it exercises the utmost care to prevent leaks, the increasing sophistication of cyberattacks makes complete protection difficult. A decline in trust could affect performance through reduced store foot traffic.

The company applies impairment accounting for fixed assets, and if the profitability of stores or other assets deteriorates, new impairment losses may need to be recognized. Recognition of impairment losses can significantly and temporarily reduce profit, materially affecting the financial statements. This risk is more likely to materialize during phases of store network expansion or continued deterioration in the profitability of existing stores.

Although the company secures multiple suppliers, disruption to part of its procurement routes could impede the supply of merchandise. In addition, products handled such as tires are susceptible to raw material price trends and overseas conditions, and if increases in purchase prices cannot be passed on to selling prices, profit margins may decline. Geopolitical risks and exchange rate fluctuations may also affect procurement costs.

The company places security deposits with building owners when opening leased stores, and if the corporate or individual owner becomes insolvent, recovery of the deposit may become difficult. Failure to recover deposits would impair assets and affect performance, and could also make continued use of the affected store difficult, impacting the operating base. The larger the number of leased stores, the greater the cumulative impact of this risk.

Although the company has implemented measures against outbreaks of infectious disease, an outbreak exceeding expectations could reduce store visitor numbers or cause store closures, reducing sales. There is also a risk that employee infections could disrupt business continuity. A business model centered on in-store sales is directly susceptible to the effects of movement restrictions imposed due to infectious diseases.