Komehyo Holdings Co.,Ltd.

Changes in economic conditions, an increase in competing purchasing operators, shifts in customer sentiment, and fluctuations in precious metal and bullion prices, among other factors, may make it difficult to secure a stable supply of used goods in both quantity and quality. The Company has diversified its purchasing channels—including purchase centers, home-delivery purchasing, event-based purchasing, on-site purchasing, trade-ins, and used-goods dealers—to build a stable procurement system; however, if this does not proceed as planned, business performance may be affected.

Appraisers with advanced expertise and extensive experience are essential for offering appropriate purchase prices for used goods and for authenticity checks, making the securing of excellent appraisers an important management issue. If the recruitment of appraisers does not proceed as planned, store opening plans may be constrained, and if a large number of appraisers leave within a short period, this could lead to the loss of purchasing know-how and significantly affect business performance.

As the volume of used goods in circulation increases, problems related to counterfeit products have become a social issue; if a major incident involving counterfeit goods occurs, confidence in the products handled may decline, affecting business performance. As countermeasures, the Company is enhancing appraisers' authenticity-checking capabilities, introducing an AI-based authenticity determination system, outsourcing to the Japan Distribution Self-Regulation Management Association, and disposing entirely of mistakenly purchased counterfeit goods, as well as establishing an appropriate response system for cases where stolen goods purchases are discovered, through linking antique dealer ledgers with POS data.

If the selection of properties meeting the Company's requirements or the staffing plans for new store openings do not proceed as scheduled, the Group's business performance may be affected. In addition, since most stores are leased, business performance may also be affected if lease contracts cannot be renewed or if rents increase. Some stores are subject to regulation under the Large-Scale Retail Store Location Act, and future store openings may also be subject to this law.

Due to the historical concentration of stores in the Tokai region, centered on Aichi Prefecture, there are regional concentration risks such as sluggish sales growth resulting from a decline in the regional economy, and impacts on sales activities from large-scale disasters such as the Tokai Earthquake. As countermeasures, the Company is working to maintain a balance between retail and corporate sales, strengthen online sales, consider the area balance between KOMEHYO and BRAND OFF, and reduce the impact per store by increasing the number of stores.

There is a risk that sales, particularly of high-value items, may fluctuate significantly due to changes in foreign exchange rates, precious metal and bullion prices, volatility in the stock market, and sudden changes in economic sentiment. Sales trends may also be affected by economic obsolescence due to changes in trends and the presence or absence of popular products that drive sales. The Company seeks to minimize such impacts through thorough inventory management using its POS system and agile monitoring of exchange rate fluctuations.

In the event of a large-scale natural disaster or infectious disease pandemic, business operations could be significantly disrupted through shortened store hours, temporary store closures, reduced inter-dealer transactions, and delays in product supply, which may affect business results and financial condition. In addition, since the Tire and Wheel business depends on the amount and timing of snowfall, unfavorable weather conditions also pose a risk of decreased sales or excess inventory. The Company addresses these risks through the establishment of risk management regulations, basic BCP policies, and disaster response manuals, along with regular evacuation and disaster prevention training.

In the course of store operations and sales promotion, the Company handles customers' addresses, names, occupations, ages, credit card information, and other personal data; if such information were leaked, the resulting loss of public trust and the substantial costs of remedial response could affect business performance. The Company is working to enhance its personal information protection management functions through the development of internal regulations, strengthening of management systems, thorough employee training, and enhanced information system security.

As the Group pursues a policy of expanding its business overseas, business performance may be affected by economic fluctuations in each country, geopolitical risks such as political and social unrest, changes in laws and regulations, and significant currency fluctuations. The Company strives to ensure legal compliance by closely monitoring conditions in each country, responding appropriately to local laws and regulations, and appropriately establishing compliance systems at each local group company.

Because the Company pays cash on the same day for purchases of used goods, its working capital turnover tends to be negative, requiring additional working capital in proportion to increases in purchasing volume; in addition, since costs for store openings, renovations, and M&A are financed mainly through borrowings from financial institutions, reliance on interest-bearing debt may remain at a relatively high level. Business performance may be affected by changes in financial conditions such as interest rate trends and by changes in the lending stance of partner financial institutions; the Company's policy is to strengthen its relationships with financial institutions and to strengthen its financial position through business expansion and improved profitability.