GEO HOLDINGS CORPORATION

The company positions store network expansion through new store openings, M&A, and store acquisitions—centered on the Second Street business and the GEO business—as a pillar of its growth strategy. However, deals may not continue to be concluded consistently, which could slow growth momentum. Temporary costs are also expected to arise when deals are concluded, potentially affecting business results and financial condition. As a countermeasure, the company is promoting diversification of its store opening policy (including franchising).

Procurement of reuse items relies almost entirely on in-store purchases from general customers, meaning stable securing of purchase volume and quality directly affects business performance. Rising environmental awareness has increased new entrants into the reuse sector, intensifying competition with other companies, making it a challenge to maintain competitiveness in purchasing. If sufficient volume or quality of procurement cannot be secured, this could lead to lost sales opportunities and a decline in gross margin.

Regarding the purchase-price representations for mobile merchandise conducted from May 2025 through November of the same year, the company received a corrective order from the Consumer Affairs Agency dated June 11, 2026, based on Article 5, Paragraph 2 of the Act against Unjustifiable Premiums and Misleading Representations. In response, costs have been incurred for reviewing education and sales measures and other related matters, which could affect business results and financial condition. Establishing a recurrence-prevention system is an urgent priority.

The reuse item purchase and sales business is placed under the permission and supervision of prefectural public safety commissions under the Secondhand Articles Business Act, requiring strict management of transaction records. Operation of amusement facilities is subject to regulation under the Act on Control and Improvement of Amusement Business, etc., regarding business hours, age restrictions for visitors, and location restrictions. If a violation of laws or regulations occurs, this could result in significant consequences such as revocation of permits or suspension of business.

The company holds and manages a large volume of customer personal information, and its dependence on information systems is increasing. If system failures or human error result in the leakage or loss of important information, this could lead to damages claims, a decline in sales due to loss of social credibility, and temporary system suspension, among other effects. As countermeasures, the company has established internal regulations, provides employee training, strengthens security, and has built an incident response framework across the group.

As the company has primarily procured business funds through financial institution borrowings, its ratio of interest-bearing debt to total assets is at a high level. Continued borrowing demand is expected going forward to support ongoing new store openings, and if a significant rise in interest rates occurs due to changes in financial conditions, funding costs could increase, potentially affecting business results and financial condition. As a risk mitigation measure, the company is promoting diversification of fundraising methods, including bond issuance.

Under its policy of expanding and promoting overseas operations, the company also plans to expand into regions where it has not yet entered. Changes in political and economic conditions in the countries or regions of expansion, unexpected changes in laws and regulations, and social disruption caused by natural disasters, riots, terrorism, or war could affect business results and financial condition. To mitigate this risk, the company continuously monitors and responds to international conditions and regulatory trends in various countries, but there are limits to responding to unpredictable events.

Because consolidated financial statements are prepared by translating the foreign-currency-denominated financial statements of overseas consolidated subsidiaries into yen, exchange rate fluctuations could affect business results and financial condition. Costs and revenues arising from foreign-currency-denominated transactions, as well as the yen-translated amounts of foreign-currency-denominated receivables and payables, are also affected by exchange rate fluctuations. As overseas expansion increases, exposure to foreign exchange risk may further expand going forward.

If profitability of stores deteriorates or the market value of held assets declines significantly, additional impairment of fixed assets may become necessary, potentially affecting business results and financial condition. Inventory may also require write-downs of book value due to declining profitability, a risk that could materialize when the environment surrounding the Second Street business and the GEO business deteriorates. Deferred tax assets may also need to be written down if estimated taxable income is reduced.

If smooth business operations are disrupted by widespread natural disasters such as earthquakes, storms, or floods, this could affect business results and financial condition. The company has formulated a Business Continuity Plan (BCP) and strives to build, maintain, and verify its business continuity framework, but there is a risk that response as planned may be difficult in the event of a large-scale disaster. Given that the company operates numerous stores nationwide, the scope of impact from a widespread disaster is a particularly notable risk factor.