DAIKOKUTENBUSSAN CO.,LTD.

The retail industry's business performance is significantly affected by economic and consumption trends in the areas where stores are located, as well as by competitive conditions with companies in the same or different industries. The Group is working to revitalize its stores through store network expansion and strengthening of product development and sales capabilities, but the impact on its financial position and business results arising from industry-wide factors cannot be eliminated.

The basic approach to store openings is based on leasing or fixed-term land lease rights for business use, with a focus on developing La Muu stores (shopping center type). However, compared to Dio stores, this results in increased capital expenditure and exposure to the business performance and opening/closing decisions of tenants. In addition, if suitable sites for new stores cannot be secured, the resulting delay or downsizing of store opening plans may affect the Group's financial position and business results.

As of May 31, 2025, 162 of the 233 stores were operating 24 hours a day, and the Group intends to continue opening stores centered on 24-hour operations. However, adjustments made in response to local residents and other parties may make it impossible to continue 24-hour operations at certain locations. If sales fail to meet plan despite the incurrence of costs specific to nighttime operation, such as noise mitigation and crime-prevention measures, this could affect the Group's financial position and business results. The Group seeks to mitigate this risk by improving investment turnover through nighttime operations and through efficient staff allocation.

As of May 31, 2025, 189 stores in the retail business were subject to regulation under the "Large-Scale Retail Store Location Act," and future new store openings exceeding 1,000 square meters, as well as renovations or expansions of existing stores, may also be subject to this Act. Responses to notification and coordination requirements related to parking, noise, traffic congestion, and other matters are necessary, and coordination with government authorities and local residents may affect the progress of store opening plans.

Business expansion requires securing and training excellent personnel, including part-time employees, and the Group has established dedicated recruitment and training departments to address this need. However, changes in the employment environment may make it difficult to secure human resources within the retail industry. If the Group is unable to secure the necessary personnel or provide planned training, this may result in a review of store opening plans or a decline in store operation levels, thereby affecting the Group's financial position and business results.

The Group operates its retail business under the regulations of the "Food Sanitation Act," and works to prevent food poisoning through hygiene management, freshness control, temperature control, and other measures. While there have been no past instances of food poisoning caused by in-house processed ingredients or prepared foods, the possibility of future occurrences cannot be ruled out, and if such an event were to occur, it could have a material impact on the Group's financial position and business results.

The Group is expanding store openings centered on the southern part of Okayama Prefecture into the Sanyo, Kansai, Sanin, Shikoku, Kyushu, Hokuriku, Chubu, and Tokai regions. As the number of stores and the areas in which they are located increase, so does the risk of disaster damage from large-scale earthquakes, typhoons, floods, and other events. In the event of a disaster, physical damage to stores and disruptions to the securing of personnel, merchandise, and electricity could impede the continuation of business operations. The Group has taken countermeasures such as formulating basic BCP policies, developing disaster prevention manuals, and conducting disaster prevention drills.

The Group holds store-related assets as well as manufacturing-related assets, and if there is a substantial decline in the real value of held assets or a significant deterioration in profitability due to revisions of business plans, impairment losses on fixed assets may need to be recognized. If such impairment losses occur, they would affect the Group's financial position and business results.

Consolidated subsidiaries operate dairy farming and fish farming businesses, and the outbreak of diseases such as BSE or deterioration of farming environments due to red tide and similar factors may force large-scale disposal of products or suspension of sales. Although each company has implemented thorough disease prevention systems, if such events were to occur, they could affect the Group's financial position and business results.