NAFCO Co., Ltd.

Under the Large-Scale Retail Store Location Act (Large-Scale Retail Store Siting Law), new store openings or floor space expansions exceeding 1,000㎡ require examination by prefectures or designated cities, and there is a possibility that store openings may not proceed as planned. In addition, revisions to the "Three Laws for City Planning" may affect plans for opening large stores in suburban areas. The Company has adopted a policy of employing store structures and operating methods that take the local environment into consideration from the store-opening planning stage, and of coordinating with local residents and municipalities.

The Company operates 359 stores (as of the end of March 2026), mainly in the Kyushu and Chugoku regions, but there are numerous competitors handling similar products, and there is a possibility of intensifying competition due to new entrants. In addition, the furniture market tends to stagnate due to changes in housing structures, the declining birthrate, later marriage, and non-marriage trends, and it faces the risk of a structural contraction in demand. The Company is seeking to differentiate itself through the development of complex stores and specialty stores and by strengthening its product lineup, but changes in the market environment may affect its business performance.

The Company holds customers' personal information through its business activities, and in the event of a leak, this could lead to a decline in credibility and adversely affect business performance. As countermeasures, the Company has established "Rules for Handling Personal Information" and a "Privacy Policy," and implements strict management and thorough dissemination to employees.

The Company handles a large volume of furniture products and seasonal products for home centers, and if unfavorable weather such as a cool summer or warm winter persists for a long period, the number of store visitors and demand for products may fluctuate significantly, affecting business performance. The Company formulates purchasing and sales plans based on seasonal product trends, but responding to weather fluctuations that exceed expectations remains a challenge.

In the event of a natural disaster such as an earthquake, typhoon, or torrential rainfall, the number of store visitors and demand for products may fluctuate significantly, affecting business performance. The Company has established a "Disaster Prevention Plan" and "Disaster Prevention Manual," and has put in place a system to prioritize the protection of human life while ensuring information transmission, asset protection, and business recovery; however, there is a risk that responding to a large-scale disaster exceeding expectations could prove difficult.

Depending on the extent of the spread of an infectious disease, the Company may take measures such as shortening business hours or temporarily closing stores, which poses a risk of affecting business results. While prioritizing the safety and peace of mind of customers and employees, the Company is taking measures to continue operations in order to fulfill its social responsibility as an infrastructure provider of daily necessities to the local community.

Cases of external cyberattacks, unauthorized access, and computer virus infections have been increasing in recent years, and if a system malfunction occurs due to an unforeseen event, business continuity could become difficult, potentially affecting business results and financial condition. As countermeasures, in addition to risk prevention through the development and operation of internal rules, the Company has established a data backup system and built redundancy into its systems.